In efforts to tame deficits, Obama leans against spending cuts

02/22/2013 3:56 PM

02/28/2013 8:17 PM

President Barack Obama insists he wants a balance of more taxes and less spending to curb runaway budget deficits. His record suggests, however, that he leans against cutting spending.

After federal spending soared during the Great Recession that straddled the end of the Bush presidency and the start of his own, Obama has never proposed cutting spending back to pre-recession levels. He never fully embraced his own deficit reduction panel’s call for a 10-year package of $4 trillion in spending cuts and tax hikes. He agreed to some spending cuts in 2011 only after Republicans took the House of Representatives and threatened to turn off the government’s credit if he didn’t go along. And he’s fighting now to replace $1.2 trillion in spending cuts over 10 years with fewer cuts and new tax increases.

The White House has tantalized budget cutters – and angered liberal Democrats – by expressing interest in cost-savings proposals such as a new method to calculate Social Security benefits that would save money in one of the biggest parts of the budget.

“That was a big step and I believe his economic team cares about this issue, but I don’t see a strategy for making sure it happens,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget.

“The truth is he’s never put forth a budget big enough to fix the problem,” she said of the deficits and rising debt. “He’s talked about it, but never fully where we need to go. He needs to be the closer in this.”

White House advisers bristle at suggestions that Obama isn’t as committed to chipping away at the federal deficit as any fiscal hawk, with Obama claiming in his State of the Union address that he and Congress had delivered $2.5 trillion in deficit reduction measures, including trimming spending. The number, however, is misleading, as it’s based on a budget high-water mark.

Many economists warn that the U.S. needs a mix of spending cuts and new tax revenue if it wants to put a dent in the government’s $16.5 trillion debt, stabilize Medicare and Social Security, and finance new highways, schools and defense.

But the White House says that in the case of the pending budget cuts – known as a sequester in Washington-speak – it believes the cuts are too indiscriminate and too steep to not knock off kilter a still recovering economy. It says Obama backs closing the deficit with more spending cuts than revenue, and this week it released a list of spending cuts that include reduced payments to drug companies and cutting back farm subsidies.

“The president has never said that we should close our deficit through revenue increases alone,” said White House Press Secretary Jay Carney. “And that’s what he’s pursued.”

The condition of the economy when Obama took office in 2009 makes it tricky to render a historical verdict on his appetite for budget cuts, said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget-watchdog group.

Though Republicans consider Obama’s stimulus spending a failure, Bixby and others contend few economists would have prescribed cutting government spending at the height of the recession.

And Bixby notes Obama did sign the 2011 Budget Control Act, which spawned not only the sequester – the spending cuts Obama now is looking to avert – but also imposed budgetary caps on discretionary spending. Those caps, which Bixby says “will come to bite somewhere down the road,” are poised to shrivel spending for the 40 percent of the budget that is spent on non-entitlement programs, including defense, education, research and development, law enforcement, Congress and the White House.

But spending on entitlements like Medicare, Medicaid and Social Security take up an ever-increasing share of the federal budget, and “there the instinct has not been to cut spending,” Bixby said.

But Bixby puts Obama on a scale of a 50-50 ratio of cuts to taxes. Obama’s fiscal commission was closer to a 3-to-1 ratio of cuts to taxes; and Republicans want spending cuts, no taxes.

Obama in a radio interview with activist Al Sharpton argued that voters side with him, citing a Pew Research Center/USA Today poll that found 76 percent of respondents in favor of trimming the deficit with a combination of spending cuts and tax increases.

“Unfortunately, I think Republicans right now have been so dug in on this notion of never raising taxes that it becomes difficult for them to see an obvious answer right in front of them,” Obama said.

Obama and House Speaker John Boehner reportedly came close to a deal in 2011 that might have led to serious deficit reduction, with both sides offering concessions. The White House says its offer – including more than $1 trillion in spending cuts over 10 years – is still on the table.

“We were there for a while, he was willing to upset his base, Boehner was as well,” said Joseph J. Minarik, senior vice president and research director at the Committee for Economic Development. “It’s a shame the two have made significant sacrifices and out of that we got nothing.”

Minarik sees Obama’s hesitation in outlining a bottom line on spending cuts as a political necessity.

“You hear people saying, ‘We want him to go first,’” Minarik said. “You look around the corner and they’re all there with paintball guns.”

Obama’s recent budgets have suggested policies “he contends would reduce spending,” said Patrick Louis Knudson, a senior fellow in federal budgetary affairs at the conservative Heritage Foundation and a former House Budget Committee policy director. “But then he turns around and spends a lot of that money and the net spending reduction turns out to be relatively small.”

Republicans during the 2012 campaign accused Obama of cutting Medicare by $716 million. The administration’s plan reduces provider payments and uses the savings to help finance a range of preventative services.

“His is an ideology that favors larger government and buys into the Keynesian theory if the economy is lagging, government needs to do more,” Knudson said. “He talks a different language, he speaks deficit reduction, but his performance is entirely consistent with his politics.”

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