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A 'state of the union' fight ahead over US government spending

How furiously to cut government spending is likely to be a major point of departure between Obama, who gives the State of the Union address on Tuesday, and congressional Republicans.

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A majority of commission members endorsed a plan that included broad spending cuts, entitlement reforms, and a bid to keep taxes from rising higher than 21 percent of gross domestic product.

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In the near term, the debate over federal finances may revolve around more mundane questions of spending – how much to cut from discretionary programs, and whether additional spending in some areas will aid job creation.

According to some news reports citing people familiar with Obama's upcoming address, the president plans to call for new spending on education and infrastructure. On Friday, Obama announced that General Electric CEO Jeffrey Immelt will head a new Council on Jobs and Competitiveness, to come up with ideas designed to get unemployed Americans back to work faster.

Republicans, meanwhile, have ramped up their pitch for spending cuts. The Republican Study Committee, a group representing about two-thirds of House Republicans including Ryan, this week outlined a proposal for $2.5 trillion to be slashed from discretionary federal programs over the next decade.

Liberal critics say Republicans' goal of cutting at least $100 billion from nonsecurity discretionary programs this year would slash prominent programs – from education to food safety – by about 40 percent. The Center for Budget and Policy Priorities also argues that the plan "would remove substantial purchasing power from a weak economy, thereby costing hundreds of thousands of jobs and raising risks of a double-dip recession."

For both parties, the stakes are high as they position themselves to woo voters in the 2012 presidential campaign. Polls show a public that's very worried about deficit spending, and that doesn't like the idea of Congress allowing itself to borrow more money by raising the official debt ceiling. But Americans also say jobs are the top priority.

Economists are also divided over the right fiscal course. Many see cutting federal deficits as a high priority but are also wary of moving immediately – at a time when a post-recession jobs recovery is still in its early stages.

Republicans argue that their spending cuts, while costing government jobs, will unlock money that can be better used to create employment in the private sector.

While Obama and Ryan will occupy the limelight Tuesday, an important arbiter of the spending debate will be the closely divided US Senate, which occupies a middle ground between the president and the Republican-controlled House of Representatives.

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