Obama to Offer Deficit-Cutting Plan as Fiscal Fight Broadens

Published: April 10, 2011 - New York Times

WASHINGTON — President Obama will call this week for Republicans to join him in writing a broad plan to raise revenues and reduce the growth of popular entitlement programs, as the battle over the nation’s financial troubles moves past Friday’s short-term budget deal and into a wider and more consequential debate over the nation’s long-term fiscal health.

In a speech to be delivered at a university here on Wednesday, Mr. Obama will in effect come off the sidelines on the debate over reducing the nation’s debt, which is reaching dangerous heights as the population ages.

After months of criticism that he has not led on budget talks, Mr. Obama will urge bipartisan negotiations toward a multiyear debt-reduction plan that adminstration officials said would depart sharply from the one proposed last week by Republicans.

The House Republican plan includes a shrinking of Medicare and Medicaid and trillions of dollars in tax cuts, while sparing defense spending. Mr. Obama, by contrast, envisions a more comprehensive plan that would include tax increases for the richest taxpayers, cuts to military spending, savings in Medicare and Medicaid, and unspecified changes to Social Security.

In his remarks, which come after Friday’s bipartisan deal cutting domestic spending by about $38 billion for the remainder of this budget year, Mr. Obama will not offer details but will set deficit-cutting goals, White House officials said. The numbers, too, are still under discussion.

“He’ll lay out his approach this week in terms of the scale of debt reduction he thinks the country needs so we can grow economically and win the future — a balanced approach,” David Plouffe, the senior White House political strategist, said on “Fox News Sunday,” one of four talk shows on which he appeared Sunday.

“Obviously, we need to look at all corners of government,” Mr. Plouffe said, adding, “We’re going to have a big debate.”

Until now, Mr. Obama has avoided prescribing specific changes to entitlement programs like Medicare, beyond those contained in his health care overhaul. Indeed, few of the recommendations made by his own bipartisan fiscal commission were included in the budget he presented to Congress in February.

What is more, while Mr. Obama proposed a five-year freeze on the growth of domestic spending, he recommended increases in education, research, infrastructure and clean-energy programs — emphasizing that although deficit reduction is important, so are investments to create jobs and skilled workers.

The growing debate over federal spending and taxes is certain to ripple from the White House and Congress to the 2012 presidential campaign, helping to shape voters’ assessment of Mr. Obama’s record and challenging his rivals for the Republican presidential nomination to respond, even as they court conservative voters who oppose any compromise with Mr. Obama.

Whether anything tangible comes of the debate, it will contrast the parties’ visions of the role of government like no other.

Republicans reacted skeptically to word of Mr. Obama’s speech. “I sit here and I listen to David Plouffe talk about, you know, their commitment to cut spending and knowing full well that for the last two months, we’ve had to bring this president kicking and screaming to the table to cut spending,” Representative Eric Cantor of Virginia, the House majority leader, said on Fox.

The timing of Mr. Obama’s remarks reflects a White House strategy devised late last year after Republicans won their House majority, together with the confluence of four events, two last week and two ahead.

The 11th-hour agreement on spending cuts on Friday night, which averted a government shutdown, removed what had been a distraction for months over this year’s unfinished federal budget. Administration officials said they also hoped the compromise, focused on six months of government spending, helped build trust with the House speaker, John A. Boehner, that will carry over to the larger debates about long-term spending and the national debt.

Although some lawmakers said on Sunday that they opposed the compromise, leaders in both parties remain confident it will pass in the House and Senate later this week.

Also last week was the moment the administration has been awaiting for months: Representative Paul D. Ryan of Wisconsin, the House Budget Committee chairman, outlined House Republicans’ long-term budget plan.

It would cut $6 trillion in the coming decade — turning Medicare into a voucher program for future generations and slashing spending for the need-based Medicaid program and other domestic budget lines — while largely sparing the Pentagon and cutting $4 trillion more in corporate and high-income taxes.

The White House settled on a strategy in December by which Mr. Obama would wait for the House Republicans to lay down their cards before he proposed major reductions in popular entitlement benefit programs, according to interviews with administration officials at the time.

Mr. Obama’s budget waiting game, however, has helped to fuel widespread criticism by Republicans, pundits and some Democrats that he has failed to lead.

Another impetus to his move on Wednesday is the White House’s belief that a self-appointed, bipartisan “Gang of Six” senators will announce this week that they have reached agreement on a debt-reduction package similar to that of the president’s fiscal commission.

After months of private discussions, the tentative agreement among the three Republican and three Democratic senators would cut military and domestic programs and overhaul the tax code, eliminating popular tax breaks but using the new revenues to lower income-tax rates and reduce annual deficits. It would be the model, if not in all details, for Mr. Obama’s own goals, Democratic officials say.

Perhaps the biggest prod for Mr. Obama to act, however, is the need for Congress to vote to raise the legal limit on the federal debt, now $14.25 trillion. That moment may come in as few as five weeks. Without an increase, no later than July, the government cannot continue to finance payments on its existing debt, potentially forcing it into an economy-shaking default.

Speaking on Saturday in Connecticut, Mr. Boehner said Republicans would not agree to raise the cap “without something really, really big attached to it.”

Unlike the recent spending-cut negotiations, in which Mr. Obama was not active until the final days, “he knows he has to take a greater role from the beginning” on the debt-limit measure and any companion plan for reducing debt, said an adviser who spoke on the condition of anonymity.

Several of the president’s political and economic advisers interviewed in recent weeks said Mr. Obama has been torn between wanting to propose major budget changes to entice Republicans to the bargaining table, including on Social Security, and believing they would never agree to raise revenues on upper-income Americans as part of a deal.

Three House Republican leaders, including Mr. Ryan, were on the fiscal commission; unlike the three Senate Republicans, they opposed the recommendations because they raised revenues and did not cut enough from health care.

The risk to Mr. Obama includes further alienating liberals in his own party. Progressive groups have formed coalitions to oppose any changes to Social Security, for instance.