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GOP says Obama’s budget blows chance of ‘grand bargain’

- The Washington Times - Wednesday, April 10, 2013

Top congressional Republicans declared President Obama's tax-laden budget for fiscal 2014 dead on arrival Wednesday, saying its failure to cut deficits destroys any hope of a "grand bargain" to fix the federal government's fiscal crisis.

The White House promoted the budget as an effort to restart negotiations on long-term deficit reduction with a mix of higher taxes on the wealthy and modest trims to entitlement programs. But House Budget Committee Chairman Paul Ryan, Wisconsin Republican, said the president's proposals on Social Security and Medicare don't come close to addressing the programs' looming insolvency.

"I don't think we should be talking about a grand bargain, because that implies that the president and Senate Democrats are ready to embrace fundamental entitlement reform, which they have shown absolutely no indication of doing," Mr. Ryan told reporters.

Mr. Obama introduced his fiscal 2014 budget to Congress on Wednesday, a $3.77 trillion spending plan that would raise hundreds of billions of dollars in taxes and commit his administration to entitlement reform for the first time by changing the way Social Security's cost-of-living adjustments are calculated.

Responding to Republican accusations that his budget doesn't trim deficits as much as he claims, Mr. Obama insisted "the numbers work."

"There's not a lot of smoke and mirrors in here," Mr. Obama said in the White House Rose Garden as he presented the document with Jeffrey Zients, the acting budget director.

Adding up the numbers

The budget proposal, which is nine weeks late, would replace the across-the-board "sequester" budget cuts that started March 1 with a mix of tax increases and more targeted program cuts. The blueprint also calls for more than $25 billion in specific spending cuts to 215 line items, slightly less than the $28 billion in individual program cuts that Mr. Obama sought last year.

Mr. Obama said the budget would reduce deficits by $1.8 trillion over 10 years, partly by raising $580 billion in additional revenue through closing loopholes for wealthier taxpayers and limiting tax deductions, as well as eliminating tax breaks for oil and gas companies. It would include $400 billion in budget cuts divided evenly between defense and non-defense programs.

"If you're serious about deficit reduction, there's no reason to keep these loopholes open," Mr. Obama said. "When it comes to deficit reduction, I've already met the Republicans more than halfway. Our deficits are already falling. My budget will reduce deficits by nearly another $2 trillion ... but it does so in a balanced and responsible way."

But in an indication of how far apart the two sides are, congressional Republicans immediately countered that the president's plan reduces deficits by only $119 billion over 10 years, when the cost of replacing the sequester cuts is factored in and the administration's fiscal "gimmicks" are exposed.

Republican sources on the House and Senate budget committees said the administration's own budget charts propose to trim deficits by $1.4 trillion, not $1.8 trillion. Mr. Ryan and Republican staffers said the administration is proposing largely bogus savings of $675 billion from ending the war in Afghanistan, as well as failing to offset a Medicare funding formula known as the "doc fix" ($250 billion), and failing to count the cost of extending certain refundable tax credits ($161 billion). Add up those gimmicks, Republicans said, and Mr. Obama is left with $119 billion in true deficit reductions over 10 years.

Republican budget sources said Mr. Obama's plan would raise taxes by $1 trillion over a decade, on top of the $600 billion in increased revenue he secured as part of the "fiscal cliff" deal Jan. 1. Mr. Obama's budget never achieves balance, with a deficit projected at $439 billion in its 10th year.

Mr. Obama also proposes to implement the "Buffett rule," named for billionaire investor Warren Buffett, which would require households earning $1 million or more per year to pay at least 30 percent of their income in taxes.

Spending proposals

The spending plan will call for several initiatives that Mr. Obama previously outlined, including universal preschool to be funded by a cigarette tax, $50 billion more in infrastructure spending to create construction jobs, and tax credits for small businesses to hire more employees. The White House said all of the new spending proposals are paid for and would not add to the deficit, which in the current year is projected at about $850 billion.

The White House estimates that the deficit in fiscal 2014 will be $744 billion.

But even before Mr. Obama submitted the budget to Congress, the proposal was receiving more attention for its approach to reform of social welfare programs such as Social Security and Medicare than for any spending programs. The president is proposing to change the way Social Security benefits are calculated, moving from the current inflation measure to the "chained" consumer price index to slow the program's cost growth by reducing payments over time to seniors and future retirees.

The budget also will call for higher-income beneficiaries to pay more for Medicare coverage, and for $600 billion more in revenue — most of which would come from capping the tax deductions that those in the higher tax brackets can claim.

The Social Security proposal would save about $230 billion over 10 years, according to administration estimates, and the health care reform would save $400 billion, mainly by cutting Medicare payments to providers.

Pushback on the left

"I don't believe all these ideas are optimal, but I'm willing to accept them as part of a compromise," Mr. Obama said. "They are reforms that keep our basic promise to our seniors."

As details of the entitlement reform have leaked, liberal lawmakers, unions and groups representing retired Americans have responded angrily. Some of them staged a protest outside the White House on Tuesday.

Mr. Ryan said the president's budget would add $8.2 trillion to the national debt over 10 years.

"This is worse than a status quo budget," he said. "It's just more taxing, more spending and more of the same."

Even some of Mr. Obama's strongest supporters objected to key parts of his proposed budget. Mary Kay Henry, president of the Service Employees International Union, backed Mr. Obama's spending proposals to create more jobs but objected to his planned entitlement reforms.

"Social Security has never been a contributing factor to the deficit and we cannot leave seniors out in the cold," she said.

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