Feb 142011
Authors: McClatchy-Tribune

WASHINGTON — President Barack Obama proposed a $3.73 trillion budget Monday for fiscal 2012 that he said will start reining in runaway budget deficits, but his plan envisions the gross national debt swelling by almost $13 trillion over a decade.

Obama’s budget sets up a clash with the Republican-led House of Representatives over how to recover from the deep recession of recent years and strengthen the economic foundation for the future, with federal spending as the pivotal battleground.
Obama would include spending boosts for education, infrastructure and research that he says are critical for recovery, but he would cut overall federal spending by $90 billion from last year in fiscal 2012, which begins Oct. 1.

He also said he would cut this year’s record $1.65 trillion deficit to $1.1 trillion next year, but he avoids tough choices on such big issues as Medicare, Medicaid and Social Security, which together are driving the national debt skyward.

His blueprint envisions federal spending jumping by $363 billion in the current year, dropping by $90 billion the next year, then rising again by an average of $218 billion a year for nine years. That would leave the government $26.35 trillion in debt after 10 years — an increase of $10.87 trillion over this year, and $12.82 trillion over last year.

Bottom-line analysts called his budget too timid to address the simmering debt crisis that could weaken America economically and strategically if left untamed.

“You’re treading water when you are about to go over Niagara Falls,” said Robert Bixby, the director of the Concord Coalition, a nonpartisan budget watchdog group.

Republicans denounced Obama’s budget.

“The president’s budget will destroy jobs by spending too much, taxing too much, and borrowing too much,” said House Speaker John Boehner, R-Ohio.

“We cannot tax, spend and borrow our way to prosperity,” said House Budget Committee Chairman Paul Ryan, R-Wis., adding that Obama’s proposal would increase taxes by $1.6 trillion over 10 years.

The House will vote this week on a proposal to cut $61 billion in spending from the current year — which would be $100 billion less than the budget Obama proposed for the current fiscal year, which began on Oct. 1, 2010.

Beyond that, House members plan to cut more spending from Obama’s proposal for the next fiscal year and beyond. House Republicans will propose details of their budget plan in the next several weeks, although final terms will have to be set in later negotiations with the Democratic-led Senate and Obama.

The coming clash could lead to a grand bargain where both sides negotiate compromises on the country’s big fiscal issues — or to a government shutdown if they can’t agree.

In a gamble, Obama declined to propose the kinds of major budget changes that his own bipartisan commission said in December were critical to averting a debt crisis, such as raising the retirement age for Social Security.

In a speech Monday in Baltimore, Obama acknowledged that his new budget proposal is only “a down payment” toward needed broader steps down the road. He noted that his bipartisan commission said the only way to get the job done is to tackle spending on all fronts — including health care, defense, and ending tax loopholes. He said he’s “looking forward to working with members of both parties” on future deficit-control measures.

White House Budget Director Jack Lew said Obama avoided making any specific proposal on big budget problems such as Social Security out of fear that it would be a target for criticism and not a catalyst for agreement.

“I worked on Social Security reform in 1983. I also worked on it in 1981,” Lew said Monday. It went nowhere in 1981, but the 1983 bipartisan effort yielded an overhaul that rescued Social Security for a generation.

“When a president came forward with a proposal, it reflected that president’s point of view, and it set the process back, not forward. It took years to get back to the point where the parties could come together, and that was facing an imminent financial crisis at the time,” Lew said.

Now, Lew said, Obama “set a tone for the discussion so that we can engage in a responsible way. I believe that’s the way you have effective discussions.”

Obama framed his proposal as one that would help create jobs, while starting to address the budget scars left by two wars and a recession that saw tax revenues drop and spending jacked up to bail out banks and auto companies and stimulate the economy.

“The fiscal realities we face require hard choices,” he said in his budget message to Congress. “A decade of deficits, compounded by the effects of the recession and the steps we had to take to break it, as well as the chronic failure to confront difficult decisions, has put us on an unsustainable course. That’s why my budget lays out a path for how we can pay down these debts and free the American economy from their burden.”

Obama noted that the budget deficit for the current year would reach $1.65 trillion, the third trillion-dollar-plus deficit in a row, and a record. That would represent 10.9 percent of the economy, the highest since World War II.

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