Obama's deficit plan begins tug-of-war with Republicans

McClatchy NewspapersApril 13, 2011 

WASHINGTON — Offering up his own $4 trillion roadmap to tame America's deficit and an admission that he doesn't expect Congress to embrace it as-is, President Barack Obama on Wednesday began a concerted effort to pull together a bipartisan deal this year.

Obama's plan, a mix of $3 in spending cuts for every $1 in tax increases to shave $4 trillion from deficit spending over the next dozen years, comes on the heels of Republicans' "path to prosperity" proposal that would cut $4.4 trillion from deficit spending over 10 years, but offer a more radical downsizing of government including the Medicare and Medicaid programs.

But Republicans quickly derided the proposal as partisan and disappointing.

"When the president reached out to ask us to attend his speech, we were expecting an olive branch," said House Budget Committee Chairman Paul Ryan, R-Wis. "Instead, his speech was excessively partisan, dramatically inaccurate and hopelessly inadequate to address our fiscal crisis."

Added House Republican Conference Chairman Jeb Hensarling, R-Texas, who also attended, "I could have watched from my office." House Republicans plan a vote Friday on their alternative to the Obama plan.

The high-stakes policy and political battle now under way reflects the dangerous levels of national debt — nearing $14.3 trillion and growing — as well as public concern over the issue and a looming political test of wills over raising the nation's debt ceiling before the federal government defaults on its obligations to its creditors.

While economists and independent budget experts criticize both parties' plans as thin on details, they said the parameters of the national debate are now taking shape.

The president, in a speech at George Washington University, called on Congress to agree to some variation of his plan by the end of June. He also accused Republicans of plotting to gut the "basic social compact" of entitlement programs such as Medicare, Medicaid and Social Security under the auspices of fiscal responsibility.

To hit his new deficit-reduction target of $4 trillion by 2023, Obama would raise $1 trillion in new tax revenue from wealthy individuals. He'd also end the Bush-era tax cuts for the top 2 percent of American earners — but not the middle class — at the end of next year. Republicans say they won't support tax increases.

Obama also suggested a "debt failsafe" mechanism to automatically trigger across-the-board spending cuts starting in 2014 if the projected ratio of debt to GDP is too high. It wouldn't apply to Social Security, Medicare or programs for low-income Americans. The president has a short-term motive for proposing it: offering Republicans more of the fiscal controls they say they'd need before voting to raise the $14.3 trillion debt ceiling.

Obama didn't call for any major changes to Medicare, including raising the eligibility age as some in the GOP have.

Instead, he anticipated efficiencies from last year's health care overhaul, and proposed empowering an independent advisory board to act more aggressively than originally envisioned to bring down Medicare costs. He also said Medicare should be able to reduce spending on prescription drugs.

Obama also didn't propose any reductions to Social Security benefits.

Overall, the president's new proposal represents a tripling of deficit reduction over what he unveiled just weeks ago with his 2012 budget plan. That's recognition that Republicans have made him vulnerable on criticism he's not doing enough to contain the nation's debt.

Sen. Orrin Hatch, R-Utah, described Obama's plan as a "do-over" attempt: "This time he was going to convince Americans that he is really, really serious about deficit reduction," Hatch said with sarcasm.

The Republican plan, by Ryan of Wisconsin, is expected to attract few if any Democrats' votes Friday, and probably will go nowhere in the Democratic-majority Senate.

Obama is betting Americans will reject the Ryan plan as well, and that such a debate over the future of Medicare could hurt Republicans and thus bolster him in his re-election campaign.

"Their vision is less about reducing the deficit than it is about changing the basic social compact in America," Obama said in his speech.

"I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry with a shrinking benefit to pay for rising costs."

Meanwhile, Republican Mitt Romney, who has formed an exploratory committee for the 2012 presidential race, said in a statement that Obama's plan was "too little, too late," and failed to address "true reform of Medicare, Medicaid and Social Security."

The president also says Congress should trim another $770 billion in non-security, discretionary costs, $360 billion from spending on programs such as agricultural subsidies and pension insurance, and $400 billion in security spending.

Vice President Joe Biden and bipartisan congressional leaders are to begin meeting next month at Obama's request to try to agree on a bipartisan reduction plan by the end of June. The debt-ceiling vote is likely to face a July deadline.

A group of six senators, three from each party, has been meeting for weeks to discuss a long-term budget plan. They're said to be close to an agreement; it's unclear if their effort would be merged into Obama's initiative.

Republicans, including Sen. Rob Portman, R-Ohio, who served as budget director for President George W. Bush, criticized Obama's plan as too light on specifics. But Rep. Sander Levin, D-Mich., the top Democrat on the House Ways and Means Committee, said the president had set up a framework that allowed the two parties to negotiate.

"I don't expect the details in any final agreement to look exactly like the approach I laid out today," Obama said, but "doing nothing on the deficit is just not an option. Our debt has grown so large that we could do real damage to the economy if we don't begin a process now to get our fiscal house in order."

Rep. Mike Ross, D-Ark., the co-chairman of the moderate Blue Dog coalition of Democrats, said he's "encouraged" by Obama's approach and thought some bipartisan compromise on deficit reduction can be enacted this year.

Republicans returned from a meeting at the White House with Obama before his speech saying they're all for cooperation but won't consider any tax increases.

"I thought the meeting was constructive in the sense that I think everyone at the White House meeting agreed that we need to, kind of, put the talking points aside and deal with what's doable," said Senate Republican leader Mitch McConnell, R-Ky.

But House Speaker John Boehner, R-Ohio, said Obama "heard us loud and clear: If we're going to resolve our differences and do something meaningful, raising taxes will not be part of that."

Leonard Burman, a tax and budget expert and professor at Syracuse University, said he's surprised that Obama is proposing 75 percent spending cuts and 25 percent tax increases. He'd favor closer to a 50-50 split.

Burman said it seems to him that "the Obama administration is negotiating with itself. It's something they would have accepted as a bipartisan compromise. If that's their initial gambit — bigger cuts and less spending — it's hard to imagine how you could do that without cutting vital programs that are important to vulnerable populations."

(William Douglas contributed to this story.)

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