Wednesday, April 13, 2011

Obama's Debt-Cutting Plan

Obama's Debt-Cutting Plan Will Confront Challenge of Finding 'Sweet Spot'


U.S. President Barack Obama

U.S. President Barack Obama is expected to announce long-term proposals for cutting the federal deficit tomorrow, following a budget deal he reached with congressional leaders last week that averted a government shutdown. Photographer: Joshua Roberts/Bloomberg

April 13 (Bloomberg) -- U.S. Senator Richard Shelby, a Republican from Alabama, talks about the need to cut the U.S. budget deficit. President Barack Obama today will outline a path to reining in the nation’s long-term debt through reductions in entitlement spending and increased taxes on the wealthy while seeking to draw a sharp contrast with Republican proposals, according to a person familiar with the plan. Shelby speaks with Peter Cook on Bloomberg Television's "In the Loop." (Source: Bloomberg)

April 13 (Bloomberg) -- David Walker, chief executive officer of Comeback America Initiative, discusses the outlook for the U.S. budget deficit and President Barack Obama's speech today on cutting the nation's debt. Walker speaks with Deirdre Bolton and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

April 13 (Bloomberg) -- Paul Donovan, deputy head of global economics at UBS AG, discusses the debt burden in the euro zone and U.S. He talks with Linzie Janis on Bloomberg Television's "Global Connection." (Source: Bloomberg)

President Barack Obama joins the discussion today over reducing the nation’s debt in a familiar position: accused of being late to the debate and facing party members on both sides skeptical of his intent.

His challenge will be to find some form of middle ground with a plan embracing entitlement cuts anathema to many Democrats and tax increases that Republicans have called a non- starter.

The president’s speech today must go beyond the budget he proposed in February so “markets and relatively impartial political observers judge that he met his own mark, without going so far as to further antagonize the unhappy members of his own coalition,” said Bill Galston, a Brookings Institution scholar in Washington. “That’s the sweet spot.”

Obama will try to show he’s willing to work with Republicans on debt reduction yet still “preserve the ability to draw a contrast in 2012” as he seeks re-election, said Karen Finney, a former spokeswoman for the Democratic Party. He needs to say that Republicans “want to end Medicare versus here’s what I want to do,” she said.

‘Presidential Dilemma’

Senator Richard Durbin of Illinois, his chamber’s No. 2 Democrat, said Obama faces the “classic presidential dilemma, having been criticized by members of both parties for not stepping in quickly enough on budget issues and now facing fire as he wades into the debt debate.

“I suppose they were waiting to see how the conversation would evolve, and where they would be asked to go,” Durbin said today at the Bloomberg Breakfast in Washington, referring to the Obama administration.

A broad group of Senate Republicans and Democrats has pressed Obama to endorse a goal of cutting the deficit by at least $4 trillion over 10 years, in line with a report last year by leaders of the his own bipartisan debt commission and a plan released last week by Republican House Budget Committee Chairman Paul Ryan of Wisconsin.

“You need a package that’s in that range -- roughly $4 trillion -- to get the debt back on track and to secure a strong future for the United States,” Democratic Senator Kent Conrad of North Dakota, head of his chamber’s Budget Committee,, said in an interview yesterday.

‘Specificity’

“People need to hear his ideas as to how to meet that standard,” said Senator Rob Portman, an Ohio Republican and director of the White House budget office under President George W. Bush. “The more specificity, the better, if we’re actually going to get something done.”

The president will call for tax increases on higher-income Americans and reductions in entitlement spending, as well as Pentagon cuts topping $150 billion, according to people familiar with the plan. Obama’s approach will draw on the debt panel leaders’ proposal for $3.8 trillion in budget savings through a mix of tax increases and spending reductions.

He will reject Ryan’s idea to replace Medicare with a voucher-like system for future recipients, a person familiar with the plan said.

Last week’s proposal by Ryan would reduce the deficit by $4.4 trillion over 10 years, mostly through deep spending cuts. It would lower the top corporate and individual tax rates from 35 percent to 25 percent and cap spending on Medicaid health care for the poor.

Income-Tax Cuts

Republicans who criticized Obama for failing to lead on deficit reduction in his February budget proposal are demanding details on how he would curb the growth of Medicare and Medicaid. They also reject any rollback of income-tax cuts for high earners.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, described Obama’s speech as an overdue acknowledgement of “problems that the rest of the country has been waiting for him to address. It’s unfortunate that he had to be dragged into this discussion.”

In the House, Speaker John Boehner called tax increases “a non-starter.”

Some Democrats had fumed that Obama wasn’t involved enough in talks on the budget for this fiscal year, which began Oct. 1. It wasn’t until a few days before a threatened shutdown last week that the president became directly involved, holding daily meetings at the White House to hash out a deal with Republicans that cuts spending by more than #38 billion.

Prized Programs

Now, some Democrats say they are concerned Republicans are dominating the budget debate and undercutting prized government programs. They are urging Obama not to embrace entitlement changes, particularly given that Ryan’s proposals on Medicare and Medicaid provide a clear contrast to take to voters.

“From my perspective, the Medicare program is the best anti-poverty program we have ever put in place in this country,” Senator Patty Murray, the Washington Democrat who heads her party’s Senate campaign arm, said yesterday. “We need to make sure it is there for the future and not undermine it.”

Senator Max Baucus of Montana, chairman of the Finance Committee, said he expects Obama to “try to come across as balanced compared to the Ryan plan, which is unbalanced.”

“Ryan basically reduces deficits on the backs of average Americans,” Baucus said. “I think the president is going to say, ‘Hey, that’s not fair.’”

Not ‘a Penny’

Democratic-leaning advocacy groups are pressuring Obama not to endorse more spending cuts, particularly in entitlement programs. The Progressive Change Campaign Committee in Washington asked Obama supporters to withhold donations to his re-election campaign if he backs cuts to Medicare or Medicaid.

Obama shouldn’t “ask for a penny of my money or an hour of my time in 2012” if he supports such reductions, said the group’s e-mail petition to supporters.

Obama had little choice but to offer a plan after Ryan grabbed attention with his proposal, said Stephen Hess, a Brookings Institution scholar.

“He’s been pushed into a corner by Ryan,” Hess said. “Everybody can be against Ryan, but everybody still pats him on the back for courage, so what kind of a profile in courage will it be if the president just lets Republicans carry the ball?”

Sixty-four senators, evenly split between the two parties, wrote to Obama last month pressing him to lead an effort to slash the nation’s debt through spending cuts and tax increases, along the lines of a bipartisan group of six senators working on a plan based on the debt commission leaders’ report.

“I continue to believe that if we start from a bipartisan basis, we’ve got a better chance of actually getting the job done,” said Democrat Mark Warner of Virginia, co-leader of the six senators.

2 comments:

Atlanta Roofing said...

It's also helpful that he explicitly noted that Social Security is not the cause of any of our debt problems. That's an extremely important point, and frankly a lot of Americans don't recognize that. I wish he had separated SS a bit more explicitly from Medicare and Medicaid and pointed out that it should be easy to fix it.

Design said...

Dear Mr. President, please back up, remember what you once knew to be true, and go with your heart. The thugs, who've got you backed into the corner, are exactly that, thugs. I know you're loathe to bring charges for misappropriation of public fund,conflict of interest and conspiracy to defraud government against the balance of our so-called representatives in; but perhaps it's time to DO THE RIGHT THING. Put Holder on it.

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