The Ticket

Obama: Republicans should help ‘finish the job’ of deficit reduction

Olivier Knox
The Ticket

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President Barack Obama delivers remarks on the budget at the White House, April 10, 2013. (Jason Reed/Reuters)

President Barack Obama declared on Wednesday that his newly unveiled fiscal 2014 budget would “reignite” sputtering economic growth and pressed skeptical Republicans to help him “finish the job” of deficit reduction. But while GOP leaders embraced Obama's call for cuts to entitlement spending, they decreed that his appeal for further tax hikes on the rich ensured that the symbolic blueprint would be dead on arrival in Congress.

“Our economy is poised for progress—as long as Washington doesn't get in the way,” Obama said in the White House Rose Garden. "Frankly, the American people deserve better than what we've been seeing: a shortsighted, crisis-driven decision-making."

The president's $3.77 trillion budget—a symbolic, nonbinding spending blueprint—includes many of his 2012 campaign themes: higher taxes on the rich, modest investments in education and infrastructure, cash for scientific endeavors. It also includes elements of his past offer to the GOP as part of a quest for a "grand bargain" that would reduce deficits by at least $4 trillion over 10 years, like adopting "chained CPI." This would reduce cost-of-living increases to Social Security and Medicare, a step loathed by liberal Democrats but heralded by Republicans in the past as a potential trade-off for higher taxes.

"When it comes to deficit reduction, I’ve already met Republicans more than halfway," Obama declared. "So in the coming days and weeks, I hope that Republicans will come forward and demonstrate that they’re really as serious about the deficits and debt as they claim to be."

In his actual budget submission, Obama served notice to liberals that he won't shy from potentially painful entitlement cuts. "I am willing to make tough choices that may not be popular within my own party, because there can be no sacred cows for either party."

Republicans panned the president's budget, but seized on his offer to reduce the growth of mandatory programs like Social Security and Medicare.

Republican House Speaker John Boehner said Obama "does deserve some credit" for those proposals, but said the White House should not "hold hostage these modest reforms" by using them to win GOP support for higher tax revenues. Republican leaders have repeatedly said they aren't interested in discussing boosting tax revenues in the aftermath of the so-called "fiscal cliff" deal adopted in the early hours of 2013. That agreement extended Bush-era tax cuts on income up to $400,000 for individuals and $450,000 for households, while letting rates rise above that level.

“The president got his tax hikes in January. We don’t need to be raising taxes on the American people," Boehner said. "So I’m hopeful in the coming weeks we’ll have an opportunity, through the budget process, to come to some agreement.”

Republican Senate Minority Leader Mitch McConnell was a bit more biting, dismissing Obama's budget as "just another left-wing wish list." Oh, except for the entitlement changes. "Let me clarify: a wish list with an asterisk."

Presidential budgets are symbolic documents that don't directly decide government spending even if they pass Congress (this one won't) and accordingly don't typically do much to create jobs.

But the nonbinding blueprint already has done something that the president himself has only rarely accomplished since taking office: It’s basically united Washington. In opposition.

Boehner had repeatedly attacked the plan, based on carefully calculated disclosures from the White House about what it would include. At the other end of the spectrum, independent Sen. Bernie Sanders of Vermont promised to fight against Obama’s call for adopting a less generous cost-of-living formula for entitlements such as Social Security.

Democrats are perplexed and annoyed by the White House strategy, which they view as a premature compromise.

Despite all that, the document could still matter.

While budgets serve chiefly as political mission statements for presidents, and political punching bags for their opponents, they can still cast a long shadow over public debates. And there's no shortage of urgency for Washington to do something in the face of sluggish economic growth and unsettlingly weak job creation.

“The timeline between the submission of a president’s budget and someone saying the phrase ‘dead on arrival’ is the shortest measure of time in Washington,” Tony Fratto, a spokesman for George W. Bush’s Treasury Department and later his White House, joked to Yahoo News.

But Fratto still calls himself “a big believer” in the process. Why?

“They are the aspirational game plans for each party. It’s the way they would like to see the world, lays out markers for the programs they consider priorities,” Fratto said.

And by offering to cut entitlement spending—a key driver of U.S. government deficits and the debt—in exchange for new tax increases that chiefly target the well-off, Obama aims to bridge the gap between Republicans and Democrats and restart so-called "grand bargain" talks aimed at finding $4 trillion in deficit reduction over the next 10 years. Obama aides, though, say any big deal has to include new revenues, something that makes Republicans balk.

"We don't view this budget as a starting point," a senior White House official told reporters on a conference call on Tuesday. "This is an offer where the president came more than halfway toward the Republicans in an attempt to get a fiscal deal."

The budget’s call for the rich to pay more in taxes lined up neatly with Obama’s winning 2012 campaign argument—as did its push to balance deficit reduction goals with modest investments in education and infrastructure. ($100 million in NASA funding to “lasso” an asteroid, though? A step toward fulfilling Obama’s plan to send an astronaut to an asteroid by 2025? A wee bit more off the beaten path. And awesome.)

The White House says that, if reflected in spending legislation, Obama's new budget would cut $1.8 trillion over 10 years. Republicans say the real figure is $600 billion because the budget replaces existing so-called "sequestration" spending cuts of $1.2 trillion with an equivalent amount.

But both sides agree the budget does not balance over its 10-year horizon. The House-passed GOP budget does so thanks to mostly undetailed spending cuts to mostly unidentified programs.

The White House budget predicts the deficit will run $744 billion in fiscal year 2014 (which starts Oct. 1). That's about 4.4 percent of gross domestic product. And senior administration officials, briefing reporters on condition of anonymity, said Tuesday that it would fall to 2.8 percent of GDP by 2016 and 1.7 percent by 2023. They did not give a dollar figure, which means those estimates could rely on rosy predictions of economic growth that are typical in any president's budget.

Budgets serve as guidelines, sometimes influential ones, but they don't become law. Actual spending levels for individual agencies are supposed to come in a two-step legislative process of authorizing programs and then appropriating funds for them, though this spring it’ll be in the form of a catch-all continuing resolution.

All this is to say that, when you hear a politician compare a government budget with a family budget, that’s true only if your family disregards its budget.

One early test of whether the GOP—anyone in the GOP—is willing to consider Obama's offer will come on Wednesday night, when he is scheduled to host 12 Republican senators for a fence-mending dinner where the budget will surely be discussed. (Sanders, meanwhile, tells ABC/Yahoo that progressives are still waiting for their invitation.)

But Fratto warned there might not be an opportunity for a major budget breakthrough even if both sides want it, thanks to a deal reached during the so-called "fiscal cliff" negotiations in early January when Republicans agreed to raise taxes on higher earners.

A major budget agreement "may be too much to ask, because I don’t know that the components of a grand bargain exists any more since the tax increase deal, tax cut deal, whatever you want to call it," Fratto said.

In that accord, Republicans agreed to extend Bush-era income tax cuts on income up to $400,000 for individuals and $450,000 for households. Since then, GOP leaders have publicly ruled out new tax hikes even as the White House has pushed for raising revenues, notably by closing loopholes and slicing into deductions for wealthier Americans.

"What we’re left with now is a situation where all of the components of a so-called grand bargain cause pain for somebody—except for inside-the-beltway deficit hawks," Fratto said. "It would be some combination of tax increases, entitlements cuts, discretionary spending cuts, so who are the winners?"

One possibility is that Obama views a grand bargain as a way to polish his legacy—he would be The Democratic President Who Reined In Entitlement Spending. He still has the "bully pulpit"—the ability to dominate the national political conversation.

Whether Democrats see it that way and are prepared to run the political risks to help the White House is an open question.

Party strategists say Democrats got clubbed like baby seals in the 2010 midterm elections in large part because of GOP ads accusing the president's party of wanting to cut Medicare. That line of attack was based on Democratic support for Obamacare, which reduced Medicare spending by $716 billion, mostly taken from insurance companies and hospitals rather than beneficiaries.

And the 2014 midterms aren't that far away.

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