As deficits, debt soar, Obama, Congress fail to confront them

McClatchy NewspapersJanuary 26, 2011 

WASHINGTON — New data Wednesday projected a record federal budget deficit this year and national debt soaring to levels rarely seen since the end of World War II.

Yet the day after President Barack Obama called in his State of the Union address for congressional cooperation to ease the government's financial crisis — while offering little guidance on how to proceed — lawmakers reiterated familiar partisan views, and few showed much will to tackle the tough solutions that experts say are crucial.

Centrist lawmakers and independent analysts lamented that Obama didn't go further and show leadership on how to tackle the deficit and debt.

"I would have liked very much if the president had spent a little more time helping the American people understand how big the problem is," said Senate Budget Committee Chairman Kent Conrad, D-N.D.

Sen. Olympia Snowe, R-Maine, a moderate who often aligns with Democrats, said it "remains to be seen" whether Obama's speech would prod lawmakers to tackle the problem.

The president got praise from some analysts for focusing on innovation and entrepreneurship. But as Alice Rivlin, a former Federal Reserve vice chairman and budget director who's a senior fellow at Washington's Brookings Institution, noted, "He's trying to do that at the worst possible moment."

Rivlin was a member of Obama's bipartisan deficit commission, whose December recommendations he barely mentioned Tuesday night. Most lawmakers on Capitol Hill similarly ignored them Wednesday. Rivlin expressed a lament common among Democrats: "I wish he had explained more clearly how this vision (he offered of "winning the future") can be carried out with the deficits and debt."

Other experts zeroed in on the same point.

"He spoke generally about reducing the deficit, but offered nothing specific," said Lee Hamilton, a former Indiana Democratic congressman who's now the director of the Center on Congress at Indiana University.

The president mentioned the bipartisan deficit commission's "Moment of Truth" plan, which offered $4 trillion worth of possible budget savings, only fleetingly.

"I don't agree with all their proposals, but they made important progress," Obama said. He lauded their effort but endorsed nothing specific, saying he was willing to look at other ideas.

Instead, he offered a five-year freeze on non-defense discretionary spending that would barely put a dent in a deficit that the nonpartisan Congressional Budget Office estimated Wednesday would reach a record $1.5 trillion this fiscal year.

That figure would top the $1.1 trillion last year and $1.4 trillion of 2009, and would represent 9.8 percent of the gross domestic product, one of the biggest shares of the nation's economy since the end of World War II. Deficits are expected to total $6.97 trillion over the next decade. Finance experts say that's simply unsustainable.

The CBO also found that while annual budget deficits should drop sharply in the next few years, government debt will still soar. At the end of last year, debt held by the public was about $9 trillion, or 62 percent of the GDP; in 10 years, the CBO estimates, that debt will total about $18 billion, or 77 percent of the GDP.

Even that figure could be conservative, since the CBO assumes no changes in current law, which would mean that Bush-era tax cuts expire as planned at the end of next year. Republicans hope to make them permanent, however.

The CBO report also had a warning about Social Security. It found that "excluding interest, surpluses for Social Security become deficits of $45 billion in 2011 and $547 billion over the 2012-2021 period." Though the trust funds aren't in danger of being depleted anytime soon, the report suggests that lawmakers may need to find ways to help the system's finances.

The CBO report, Conrad said, "should be a wakeup call to the nation," but it didn't seem to spark much serious talk about deficit-cutting on Capitol Hill.

In the House of Representatives, Speaker John Boehner, R-Ohio, charged that it was clear that "the president and his team haven't gotten the message the American people sent in November: We can't spend and borrow our way to prosperity."

In the Senate, 19 Republicans offered a constitutional amendment Wednesday to balance the budget. The proposal has been around for decades. The amendment, which would need the support of 67 senators, two-thirds of the House and three-fourths of the states, failed in the Senate by one vote in 1997.

Such talk is hypocrisy, said Sen. Charles Schumer, D-N.Y., recalling how the GOP pushed hard last year for making the Bush-era tax cuts permanent even though they blow huge holes in the federal budget. Congress agreed to a two-year extension.

"You can't talk out of both sides of your mouth," Schumer said. "You can't say, 'I'm for reducing the deficit. I'm for a balanced budget amendment,' and then propose a trillion dollars in tax cuts for the wealthy, which increases the deficit."

The new Republican plan would require the president to submit a balanced budget to Congress each February, and Congress would have to pass a balanced budget each year. Annual spending would be capped at 20 percent of the economy; last year, it was 23.8 percent.

Any tax increases would need the approval of two-thirds of Congress. Two-thirds majorities could waive the caps in times of war or a national emergency.

Sen. Orrin Hatch, R-Utah, argued Wednesday that lawmakers clearly can't make tough budget choices without some legal hammer such as the proposed amendment.

"Washington has proven it isn't making these choices on its own," he said.

Some Democrats, such as Conrad and Rep. Chris Van Hollen of Maryland, vowed to draw up long-range debt-cutting plans.

But, Van Hollen said, any fiscal steps can't be so drastic that they impede the nation's fragile recovery.

Conrad rejected the idea of a balanced budget amendment, saying it threatened to cut Social Security dramatically. Other Democrats said that the GOP, whose House leaders will try next month to cut at least $60 billion from the current year's budget, was misguided.

Republicans, said Senate Majority Whip Richard Durbin, D-Ill., "view the budget like a pinata. ... They believe if you put on a blindfold and swing away, no matter what you hit is wasteful. That is a mindless view when it comes to budgeting."

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Check out McClatchy's politics blog, Planet Washington

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