Washington Post: Obama Budget Proposal Raises Discretionary Spending Above Caps

News Article

By Steven Mufson, Juliet Eilperin and David Nakamura

President Obama will present a federal budget proposal on Monday that would exceed restrictive spending caps mandated by Congress four years ago and propose new capital gains and bank taxes, an effort that will likely get bogged down in congressional opposition to taxes and big budget deficits.

With the budget deficit down to pre-financial crisis levels, the president will seek to obtain congressional approval for breaking through spending caps -- commonly referred to as "sequestration" -- that he says will hurt domestic programs and undermine military preparedness, the latter a concern of many Republican defense hawks. He would set spending at a level $74 billion above the cap.

But the plan -- which came under immediate fire from Republicans -- is just the opening salvo in a battle that has become not just an annual Washington ritual but a symbol of congressional dysfunction, partisanship and poor relations between Congress and the White House.

Legislation passed in 1974 required Congress to come up with a broad budget to mesh spending and revenue plans. But Congress has not passed such a measure since April 2009, and fiscal years have frequently ended with continuing resolutions that freeze old priorities in place.

"He is the most liberal, fiscally irresponsible president we've had in history," said Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) in an interview right after the White House released its topline figures Thursday. "I don't know why he doesn't see it."

The fact that the GOP controls both houses of Congress represents the biggest change in this year's budget debate and could provide some incentive for a broader deal between the two parties. But the enormous chasm between the White House proposal and the fiscal solutions Republicans prefer makes it hard to imagine a meaningful compromise.

"You're facing a debt crisis not because Americans are taxed too little but because the government spends too much," Hatch said.

Obama's budget proposal represents a roughly 7 percent increase in 2016 discretionary spending over the levels that would trigger cuts under sequestration. The plan would provide $530 billion on the non-defense discretionary side, an increase of $37 billion over the spending caps, and $561 billion in defense spending, an increase of $38 billion over the spending caps.

White House press secretary Josh Earnest told reporters the administration recognizes that any final budget bill is "by definition, going to have to be bipartisan.

"Anybody that's sort of observed this process, even for a short period of time, would acknowledge that this is the beginning of a negotiation, but it's important," Earnest said. "Budgets are important because they're a way that we can codify our values and our priorities."

While Republicans intend to adopt a unified budget now that they control both chambers, they are also divided. Some have signaled a willingness to break spending caps to bolster the Pentagon budget while others have vowed to shrink government expenditures and rein in deficit spending. Although members of the Joint Chiefs of Staff have warned of problems sustaining readiness, the military budget after adjusting for inflation is still in line with what it was in 2007, when the United States had much larger troop commitments in Afghanistan and Iraq.

Senior military officials have talked about the caps imposed on the Pentagon budget -- which have forced the Pentagon to pare back training, slash troop levels and gut modernization programs -- in increasingly dire terms given the growing number of threats and instability overseas.

"No foe in the field can wreak such havoc on our security that mindless sequestration is achieving," retired Marine Gen. James Mattis testified before the Senate Armed Services Committee on Tuesday.

The panel's chairman, Sen. John McCain (R-Ariz.), said the following day that the dire threat to the military should be enough to open the door to a potential bipartisan compromise: "America's national defense can no longer be held hostage to domestic political disputes totally separated from the reality of the threats we face."

But it is unclear, in the words of the House Budget Committee's top Democrat Chris Van Hollen (Md.), "who has the upper hand within the Republican Caucus. Is it the defense hawks or the fiscal hawks?"

Rep. Tom Cole (R-Okla.), who chairs the House Appropriations subcommittee on labor, health and human services, education and related agencies, said in an interview his party is not willing to waver from its budget commitments just to help the military.

"A lot of this gets down to whether or not the president is willing to work through tax reform and entitlement reform, or decide he wants to raise taxes," said Cole, a conservative who is close to House Speaker John A. Boehner (R-Ohio). "I don't believe Republicans are willing to raise taxes."

For Obama, the budget marks another opportunity to lay out his priorities. He will emphasize tax credits to help the middle class, free community college education, and infrastructure spending, paid for by tax increases, mostly in the capital gains tax.

"It's just like the State of the Union address; people said none of that is going anywhere," said Jared Bernstein, former economic adviser to Vice President Biden who is now at the Center on Budget Policy and Priorities. But Bernstein said that Obama is "very much setting up the 2016 debate in a way that only someone with his bully pulpit can do."

With the economic recovery picking up steam in recent months, Earnest said, Obama intends to reverse the cuts imposed by lawmakers to discretionary domestic programs and to the defense budget.

"And I think it's also clear that the president has some credibility around these issues now -- that he inherited a terrible financial crisis, the worst financial crisis that our economy has sustained since the Great Depression," he said, adding both Republicans and Democrats dislike the sequester. "So you'd think we'd be able to find some bipartisan agreement around ending it."

But many Republicans will point to the deficit, and its potential to balloon. The Congressional Budget Office on Monday said the federal budget deficit would ease slightly to $468 billion this year. As a portion of the economy, the deficit -- 2.6 percent of GDP -- would be the smallest since 2007 and close to the average over the past 50 years. But CBO forecast an increase in the deficit after 2018 and warned of dangerously high interest payments and deficits in the long term.

Legislation to raise the debt ceiling expires in mid-March, though CBO director Douglas Elmendorf said the Treasury would be able to meet spending needs for several months after that.

Congress established sequestration in the Budget Control Act in 2011, mandating spending cuts that were projected to total $1.2 trillion and were scheduled to begin in 2013 and end in 2021, evenly divided over the nine-year period.

The Budget Control Act's stringent overall spending limits apply to discretionary spending. Discretionary spending is anything that Congress funds each year through the appropriations process. It doesn't include Social Security, Medicare or Medicaid, which are known as "mandatory" programs, or entitlements. But it includes virtually everything else, a broad range of programs for the military, Veterans Affairs, scientific research, education, Energy Department programs, housing, the FBI, environmental enforcement and more.

Obama's push to exceed the spending caps is already sparking a fight with Republicans, who have criticized him for attempting to grow the government at a time when wages have stagnated, limiting the benefits of the economic recovery.

"Republicans believe there are smarter ways to cut spending than the sequester and have passed legislation to replace it multiple times, only to see the president continue to demand tax hikes," said Boehner spokesman Cory Fritz. "Until he gets serious about solving our long-term spending problem, it's hard to take him seriously."

In his address to fellow Democrats, Obama also plans to emphasize the need for Congress to pass a measure to fund the Department of Homeland Security beyond Feb. 27, when the agency's funds are set to expire. House Republicans are attempting to use that deadline to force Obama to accept a rollback of his executive actions on immigration announced in November.

Despite Obama's calls for bipartisanship in his State of the Union address, the budget will likely cause more friction.

"You've seen a lot of Republican rhetoric about the need to address the middle class squeeze and wage deflation," Van Hollen said. "So the question is what Republican policies are going to address this in a meaningful way? We believe Democrats have an answer."

Despite the bickering and positioning, it is possible that both parties could seek a short period of relative stability. Budget experts say consensus could still coalesce around trade authorization, middle class tax credits, some elements of corporate tax reform and a truce over the debt ceiling.

Several lawmakers, including Cole and Van Hollen, said they saw that short-term deal as quite possible. But Cole argued entitlement reform is the one way the president could get Republican votes to steer additional spending to his top policy priorities while also putting the country on a more sustainable fiscal path.

"If you look at it structurally, this is a perfect time to make something big happen," Cole said.

Source