Updated at 12:55 a.m. on February 14.
Some of President Obama's liberal allies don't like it. Almost all of the Republicans on Capitol Hill don't like it. It barely (if at all) addresses the massive entitlement spending that has the nation treading frantically in a sea of red ink. And it has no chance of passing in the Republican-controlled House.
So what's the point of the $3.7 trillion budget for fiscal 2012 that President Obama is unveiling today?
The president, touting the budget’s increases for education at a school in Baltimore this morning, called his blueprint a “down payment.”
“While it's absolutely essential to live within our means, while we are absolutely committed to working with Democrats and Republicans to find further savings and to look at the whole range of budget issues, we can't sacrifice our future in the process,” he said.
Translation: The president's budget plan is really an opening bid.
Republicans aren't impressed.
“Not enough!” That’s the GOP's main talking point today. As stacks of budget books arrived on Capitol Hill this morning, Rep. Scott Garrett, R-N.J., the vice chairman of the House Budget Committee, offered the back of his hand. “It's an astounding budget,” he said. “It’s a failure of leadership that the president didn't understand what voters said on November 2.”
Sen. Marco Rubio, R-Fla., said that Americans “have every reason to be disappointed by the President’s budget and by Washington politicians who either don’t understand the seriousness of our fiscal crisis, or who are simply not willing to confront this challenge head-on.”
Republicans have proposed $100 billion in discretionary spending cuts for the current fiscal year; their outline for 2012, which will be unveiled over the next several weeks, is expected to be even more austere.
In real terms, Republicans want to reduce the amount of money the government plans to spend this year by $60 billion, compared to about $27 billion in Obama’s budget. In nominal terms, Obama freezes spending at 2010 levels through 2015, with the exception of defense. But even the Pentagon is on a tight leash: All it would get is adjustments for inflation.
Given the divided partisan control of Congress, the chances of reaching a compromise between those two approaches in the near term are slim.
One reason: The White House hasn't put all its cards on the table yet when it comes to long-term entitlement reform. That's because the president wants to establish his bona fides as a budget-cutter first -- something he believes he's doing with a document that is already causing some Democratic constituencies to squawk. He hopes that will allow him eventually to shift the focus from cutting budgets to establishing long-term priorities for economic growth.
If Americans agree with the White House that its cuts are sufficiently serious, then it will be easier for Obama to focus the debate on priorities and job growth. The watchword here is “sustainable deficits.” The U.S.’s fragile economic growth could be imperiled by significant budget cuts. Financial markets, not to mention the U.S. public, will accept a plan that allows for deficits that don’t exceed their share of interest payments on the national debt, the White House believes.
On the longer-term financial question -- the difficult choices that have to be made on entitlement reform -- Obama and his team want the Republicans to go first. The idea is to allow the pressure of time to force both sides to make now unthinkable concessions: Republicans have to agree to raise taxes and Democrats will have to swallow some benefit cuts.
The president has some ideas about how to extend the life of the Social Security Trust Fund -- he’s already mused about lifting the $106,000 cap on income that’s subject to the Social Security tax -- and his health reform bill includes mechanisms to slowly lower Medicare and Medicaid costs over time. But, for now, the White House is focusing on the more immediate fights over the current budget.
The first will be triggered by the federal debt limit, which will be exceeded in March unless it is raised by Congress.
In briefings with reporters, administration officials note that Republicans have yet to put forward their own entitlement reform plans. And Republicans don't make that much of a dent in the long-term deficit, either. The plan by House Budget Chairman Paul Ryan, R-Wis., does not envision a balanced budget until 2063. The GOP's insistence on making permanent the Bush-era marginal tax rates extended for all brackets means the numeric difference between the GOP and Obama budgets will be tiny -- less than 2 percent of the budget even if Republicans are allowed to assume that making tax cuts permanent or getting rid of health care reform won’t increase the deficit.
Still, the Republican focus on deficit reduction will test the White House’s credibility as a messenger of fiscal discipline.
Republicans seized immediately on the $7.1 trillion in projected deficits that the budget anticipates through 2011, as well as the record $1.6 trillion deficit for this year, equal to about 9 percent of gross domestic product. House Speaker John Boehner, R-Ohio, says these deficits “will destroy jobs by spending too much, taxing too much, and borrowing too much.”
The White House envisions a reduction of about $500 billion from the deficit next year, and by 2015, it would be well below $1 trillion, bottoming out at about $600 billion. At that point, the costs of paying for Medicare and Social Security for baby boomers would overtake the spending reductions and the deficit would start to rise again.
Having accepted the necessity of budget cuts, Obama’s budget offers what he called “hard choices” for Democrats, too. Home heating oil subsidies would be pared back significantly, as would money for the U.S. Forest Service, the Army Corps of Engineers, some housing programs, and community development block grants.
Some of the president's allies aren’t happy.
The Economic Policy Institute, a labor-backed think tank, is disappointed that the president has backed away from demand-side investment. The funding increases in the budget, “while welcome, are insufficient to put a major dent in unemployment,” said John Irons, EPI’s budget policy director. “Furthermore, the overall freeze in domestic discretionary spending all but ensures that the fight to create jobs and ensure future economic growth will be limited.”
Tim Fernholz contributed
Get the latest news and analysis delivered to your inbox. Sign up for National Journal's morning alert, Wake-Up Call, and afternoon newsletter, The Edge. Subscribe here.
Leave A Comment