President Barack Obama will unveil a spending plan Wednesday that he hopes will provide a compromise to the two feuding parties on Capitol Hill, offering Republican-friendly proposals – including those that cut Social Security and Medicare – tied to tax increases on the wealthiest Americans.
White House officials say Obama is willing to offer a compromise in order to cut the deficit by $1.8 trillion over 10 years. Republicans say that number is less than half – $600 billion – because the president wants to restore across-the-board spending cuts that took effect in March.
“This is not the president’s ideal budget proposal,” White House spokesman Jay Carney told reporters Friday. “It is a budget proposal that represents a good-faith compromise position .”
Obama’s budget probably won’t change the dynamics in an increasingly polarized atmosphere, in part because it comes more than two months late, after both the Republican-led House of Representatives and the Democratic-controlled Senate have passed their own plans for the fiscal year that starts Oct. 1. That kind of delay is unprecedented since the modern budgeting process was established nearly a century ago.
Republicans are unlikely to embrace a budget that raises taxes, though its release comes on the same day that Obama continues his sudden spurt of political outreach with lawmakers at a dinner with a dozen Senate Republicans.
House Speaker John Boehner on Friday objected to the tax increases in the proposal, saying House Republicans have urged Obama “not to make savings we agree upon conditional on another round of tax increases.”
“If the president believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” said Boehner, R-Ohio. “That’s no way to lead and move the country forward.”
Republicans complain that spending remains higher than it was in fiscal 2009, when a federal stimulus plan was implemented to try to boost the faltering economy. Democrats argue the trajectory of spending continues to fall. Both are correct.
In fiscal 2009, government outlays – what was spent – amounted to $3.517 trillion. For fiscal 2012, which ending Sept. 30, 2012, that number exceeded $3.538 trillion. That’s about $21 billion higher.
The number looks different when seen through the prism of discretionary spending; what Congress controls and isn’t mandated.
Both discretionary defense spending and discretionary non-defense spending have fallen since 2009, but neither has reached pre-economic stimulus levels
Obama wants to spend money on new proposals – $65 billion for road, bridge and building repairs; $1 billion for 15 manufacturing institutes; $100 million on brain research; as well as millions more for expanded preschool and high-tech teachers.
The preschool program would be fully paid for by an increase in taxes on cigarettes and other tobacco products, though Carney declined to say by what amounts. The budget would raise revenue by closing a loophole that allows people to collect full disability benefits and unemployment benefits over the same period and banning the accumulations of more than $3 million in IRAs and other tax-preferred retirement accounts. Other details will be released next week.
While the House and Senate plans are considered blueprints, the president’s budget is a detailed, line-by-line accounting of spending that is most important for the vision it presents on the expected trajectory for the nation’s finances.
“It’s more of a marker,” said Michael Linden, managing director for economic policy at the Center for American Progress, a liberal think tank that works closely with the White House.
Obama’s budget will try to strike a balance between the House and Senate plans, passed March 21 and 25, respectively. Bob Bixby, head of the budget watchdog group the Concord Coalition, said Obama is looking at the budget as an opportunity to “signal to Republicans that he’s open to a compromise.”
The president has agreed to a more conservative measurement used in calculating cost-of-living adjustments for Social Security beneficiaries and others who receive some form of government payment. This move would switch the method of determining the cost-of-living adjustment to what’s called the Chain-Weighted Consumer Price Index, which is less generous than the current method of calculating adjustments.
“That’s an entitlement cut, and the Republicans have obviously consistently called for that,” said Jared Bernstein, a former chief economist to Vice President Joe Biden who works at the liberal Center for Budget and Policy Priorities.
Progressive groups and advocates for seniors said Friday that they were strongly opposed to a change that Carney, when pressed, admitted would constitute a tax increase on the middle class.
“Social Security is too important to the economic security of the American people to be used as a bargaining chip,” said Nancy Altman, founding co-director of Social Security Works, a coalition of state and national advocacy groups for the disadvantaged.
And it still may not be enough to appease Republicans .
None of the three budgets are likely to pass, though. Congress may have to continue enacting temporary spending bills to keep the government running.
“Everyone would be surprised if we got an actual budget this year coming out of Congress,” said Roberton Williams of the Tax Policy Center. “It’s a set of three non-starters.”