Obama's budget frames election choices, doesn't solve long-term problems

McClatchy NewspapersFebruary 13, 2012 

WASHINGTON — President Barack Obama's proposed federal budget is more campaign commercial than governing document.

His $3.8 trillion budget for the fiscal year starting Oct. 1 — and blueprint for the coming decade — is filled with promises sure to appeal to voters that he wants to win for his re-election in November, such as new spending to hire teachers and tax increases on the wealthy.

Yet it has no chance of passing Congress, where Republicans already have vetoed his calls for more spending and taxes. It offers little prospect of breaking the Washington cycle of lurching from fiscal crisis to fiscal crisis with temporary agreements and no consensus on permanent solutions. And it maintains a decade of red ink while putting off until after the election — at the earliest — any detailed proposals to fix long-term problems in Social Security, Medicare and Medicaid.

"It's not going to be enacted," said Robert Bixby, executive director of the Concord Coalition, a bipartisan group that advocates fiscal responsibility. "It's designed to shape the campaign. There's a lot of spending for new investments and there's spending caps in the future so he can claim two things at once."

"The president's budget fails to lay out a substantive path to restore fiscal sanity," said David M. Walker, former director of the Government Accountability Office. "It does not include enough specifics regarding comprehensive tax reform and neglects any reforms to Social Security. It is not bold enough or specific enough regarding proposed changes to Medicare, Medicaid and other health reforms."

Obama unveiled his budget proposal at a community college in Annandale, Va., — a swing state he won in 2008 and is courting heavily this year — where he used the same broad themes he's used since Labor Day to frame the coming election.

"We've got a choice," he said. "We can settle for a country where a few people do really, really well, and everybody else struggles to get by. Or we can restore an economy where everybody gets a fair shot, everybody does their fair share, everybody plays by the same set of rules — from Washington to Wall Street to Main Street."

In his budget, he stressed the need for federal spending to help people get a better foothold in a struggling economy. Among his proposals: a $350 billion plan to stimulate the economy, including many specifics that Congress rejected last year.

He also proposed letting tax cuts expire as scheduled on Dec. 31 for those making more than $250,000. That's unlikely to happen the way he wants, either; Republicans, who control the House of Representatives and can block Senate action, are against it.

He proposes to extend the Bush-era tax cuts permanently for incomes below $250,000. Republicans demand that the tax cuts be extended for higher incomes also. If both sides hold firm, they'll let all the tax cuts expire at the end of this year; one likely compromise: They could extend them all, as they did for two years at the end of 2010.

Obama did propose changing a part of Medicare financing that would end one of Washington's annual stopgap solutions: the need every year to restore full Medicare payments to doctors. Prospects for permanently fixing the problem, caused by an earlier law mandating lower payments, remain uncertain.

The president did not, however, propose specific solutions to the long-term problems in Medicare and Social Security, which will grow worse as the baby boom generation retires and collects benefits.

"This is a moment when our country requires a dramatic, bipartisan effort to reduce the deficit," said Sen. Joe Lieberman, a Connecticut independent. "While there are elements in the president's budget I would support, it does not propose the type of bold entitlement and tax reform that is necessary to substantially reduce the deficit. Quite simply, it is not the blueprint we need to put our fiscal house back in order."

Even if enacted as proposed, Obama's budget would spend $901 billion more next year than it took in. That would be the first time in five years that the annual deficit dipped below $1 trillion. And it would clearly fall short of his 2009 pledge to cut the deficit in half by 2013 — to about $650 billion by his own accounting at the time.

Obama used the new budget to portray himself as a deficit hawk, saying he'd cut $4 trillion from projected deficits over the next 10 years. However, he and Congress already agreed to $2.1 trillion of that last year when they enacted the Budget Control Act.

Also, he counts as spending cuts $850 billion that would have been spent on wars in Afghanistan and Iraq — as if they would have raged on for another decade.

"The administration ... is assuming nearly $850 billion in 'war savings' that were never going to be spent anyway," said Bixby.

Added Walker, "The budget uses accounting gimmicks to generate 'savings.'"

Over the coming decade, Obama's budget would include deficits totaling $6.7 trillion. Including interest, they would increase the debt held by the public from $11.6 trillion in fiscal 2012 to $19.5 trillion in fiscal 2022. It was $7.5 trillion when he took office in 2009.

One result of the deficits: The amount of the federal budget devoted to paying interest would jump from 6 percent this year to 14.6 percent in 2022.

Deficits over the coming decade would be lower — totaling about $3.1 trillion — if Congress and Obama did nothing. That's largely because taxes would go up for everyone as the Bush-era tax cuts expire Dec. 31.

Mitt Romney, the front-runner for the Republican presidential nomination, blasted Obama for refusing to offer specifics on entitlement reform. The former Massachusetts governor has proposed raising the retirement age for Social Security and means-testing benefits for wealthier Americans.

"I believe we can save Social Security and Medicare with a few common-sense reforms, and, unlike President Obama, I'm not afraid to put them on the table," Romney said.

Obama's campaign attacked Romney's proposals.

"Romney's devastating cuts to Medicare and Social Security won't sound like common sense to most Americans," said Obama campaign spokesman Ben LaBolt.

In the Republican-controlled House, Budget Committee Chairman Paul Ryan, R-Wis., plans to propose a budget in April that would attempt to rein in Medicare spending. He's expected to propose anew that Medicare beneficiaries after 2022 get to pick from different plans, with federal aid to help pay the cost.

His Social Security proposals are less specific, though Ryan has in the past proposed permitting taxpayers to invest their Social Security taxes in private accounts.

In the Democratic-controlled Senate, Democrats did not bring a budget to the Senate floor last year and don't plan to do so this year. By law, Congress is supposed to pass a general budget outline by April 15. The outline guides the appropriations and tax-writing committees, which then write legislation specifying spending and tax levels.

(William Douglas of the Washington Bureau contributed.)

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