Obama’s budget proposal draws rapid fire from legislators

For immediate release: Feb 25, 2010

WASHINGTON — President Obama’s proposed $3.8 trillion budget ran into immediate trouble in Congress on Monday among lawmakers who said it tries to do too much while cutting the deficit too little.

The quick response came as Obama sought to juggle his twin goals of creating jobs, which entails tax cuts and new spending, and cutting the deficit, which involves the opposite.

Republicans who spent the past year criticizing Obama’s $862 billion economic stimulus package, said the president was being spendthrift by raising the overall budget 3%. They lambasted his plan to let President George W. Bush’s tax cuts expire next year for families making more than $250,000.

Rep. Paul Ryan, R-Wis., top Republican on the House Budget Committee, called the budget “a very aggressive agenda of more government spending, more taxes, more deficits and more debt — with just a few cosmetic budget maneuvers to give the illusion of restraint.”

Liberal budget experts agreed that the plan didn’t go far enough to reduce the deficit, despite $1.6 trillion in savings over 10 years. The $1.56 trillion deficit would be cut in half by 2014 but grow back to $1 trillion by 2020. The cumulative deficit over 10 years: $8.5 trillion.

“It falls well short of what will be needed to get deficits under control,” said Robert Greenstein of the liberal Center on Budget and Policy Priorities. “The budget probably goes as far in that area as today’s toxic political environment will allow.”

That’s the problem facing Obama and Congress as the budget debate begins along with congressional election campaigns. For years, lawmakers have rejected presidents’ budget proposals and reshaped them because they have the final power to approve spending.

AT A GLANCE: Breaking down the proposed budget
TRACKER: See how the government distributes your tax dollars
SPENDING PLAN: President unveils $3.8 trillion proposal
THE OVAL: Budget day at the White House
RECOVERY WATCH: Tracking the economy
STATES: Spending levels maintained

Cutting more out of the deficit would be left to a bipartisan commission Republicans have yet to endorse. The panel’s recommendations would come after the election, and there’s no guarantee Congress would adopt them.

Obama did not propose any major savings in Medicare, Medicaid and Social Security, the three entitlement programs that consume nearly 40% of federal spending. By 2020, they’ll eat up 46%.

“I am disappointed that he himself failed to jump-start reform by making tough choices on the real budget busters like Social Security, Medicare and Medicaid,” said Sen. George Voinovich, R-Ohio, who is retiring.

Obama did not propose tax increases on families with incomes less than $250,000. They could be hit with higher costs if Obama gets his stalled health care or climate change bills through Congress.

This year’s deficit is 10.6% of the nation’s economy, more than three times the level that is sustainable, administration officials said. Budget director Peter Orszag said a continued economic recovery, along with tax increases on upper-income people and a freeze on some domestic spending, should bring it down to 4% by 2014.

That’s not enough, Orszag admitted. He said getting it down to 3%, which represents a balanced budget except for interest payments on the debt, would require Republican cooperation. The debt is slated to rise from $14.3 trillion to $25.8 trillion in 2020.

DEFICIT: Who’s at fault? Bush? Obama? Congress?
YOUTUBE: Obama finds (mostly) friendly audience
OBAMA: Debt is legacy of ‘decade of profligacy’
BUDGET: $30B in TARP funds to go to small-business lending
PROS AND CONS: Obama crafts strategies to create jobs
ECONOMY: Jobs may rebound in 2010
FOURTH QUARTER: Economy grows at 5.7% pace

“In order to meet this challenge, I welcome any idea, from Democrats and Republicans,” Obama said Monday. “What I will not welcome — what I reject — is the same old grandstanding when the cameras are on and the same irresponsible budget policies when the cameras are off.”

Democrats praised the president for devoting about $266 billion to tax cuts and spending increases designed to continue recent economic growth and create jobs. That would be exempt from Obama’s rule requiring spending or tax cuts to be paid for.

“I’m committed to working with President Obama … to cut taxes for small businesses and working families,” said Senate Finance Committee Chairman Max Baucus, D-Mont.

In addition to the proposal to raise taxes on high-income families, Obama would impose a fee on banks, eliminate tax breaks for oil and gas companies and freeze some domestic spending. Counting the levies contained in his health care and climate change proposals, taxes could rise by more than $2.2 trillion, according to Clint Stretch of Deloitte Tax.

The budget is built on these economic assumptions: an economy growing at a 4.3% clip, unemployment dropping below 9% by the end of next year and inflation holding below 2%. “The trajectory of the economy is greatly improved,” said Christina Romer, who chairs the president’s Council of Economic Advisers.

Besides maintaining the health care and climate packages, the budget would raise spending for education, clean energy, infrastructure projects and research and development. It includes money for the war in Afghanistan, homeland security and veterans.

About 120 programs would come in for $20 billion in cuts, led by NASA’s moon mission and the Pentagon’s C-17 aircraft. The cuts represent one-half of 1% of the budget — but they face opposition in Congress.