Obama aims to cut deficit in half by ’13

Call it Fashion Week for budget wonks. In a city known more for sensible shoes than stylish stilettos, Washington is entering a week like no other.

The action begins Monday, with a White House “fiscal responsibility summit” aimed at focusing attention on the exploding budget deficit and looming insolvency of entitlement programs. On Tuesday night, President Obama delivers a State-of-the-Union-like speech to a joint session of Congress.

On Thursday, Mr. Obama releases his first budget, or least the outlines of one. The week ends in Philadelphia, with the first official meeting of Vice President Joe Biden’s Middle Class Task Force.

Taken as a whole, the week is shaping up to be equal parts substance and public relations. On Monday, Obama is expected to announce that he plans to cut the budget deficit in half by the end of his term. The White House projects that the inherited deficit of $1.3 trillion will be reduced to $533 billion by 2013, as the US withdraws troops from Iraq and raises taxes on business and the wealthy, according to published reports.

Much has been made of former President Bill Clinton’s suggestion that Obama speak a bit more optimistically about the economy to raise consumer confidence. But the president is walking a fine line, as economic indicators grow increasingly bleak.

“In terms of tone, he has to strike a balance,” says political analyst Stuart Rothenberg. “He can’t say we’ve turned things around, things are going to get better, because he doesn’t know if that’s the case.”

If Obama sounds too upbeat, he will be quickly seen as out of touch, Mr. Rothenberg adds. “But I think Clinton’s probably right: There’s a danger of talking down the economy,” he says. “Since psychology is such a critical part of the economy and our ability to get out of the current spiral, he has to address that.”

By starting the week with a three-hour summit on “fiscal responsibility,” Obama signals that longer-term fiscal problems must be considered in conjunction with the immediate economic crisis. Discussions will touch Social Security, healthcare, tax reform, and the budget process. The 130 invitees include lawmakers, scholars, and leaders of advocacy groups.

On the face of it, talking about reducing the deficit – which entails budget cuts, tax increases, and politically risky changes to entitlements – may seem to contradict the spending increases and tax cuts just put in place in Obama’s $787 billion stimulus plan.

“It does sound like stepping on the gas and on the brake at the same time,” says Robert Bixby, executive director of the Concord Coalition, which advocates fiscal discipline. “In fact, I think it’s complementary.”

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