Why the budget deficit is so hard for Congress to shrink
Congress has less and less leeway for closing the budget deficit as outlays for entitlement programs grow.
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Mr. Obama's $3.7 trillion budget plan for next year proposes a five-year freeze on nonsecurity discretionary spending in a bid to cut $400 billion over 10 years. That would bring discretionary spending to "the lowest share of the economy since Dwight Eisenhower," Obama said Feb. 15 during a press conference.Skip to next paragraph
He would cut or eliminate more than 200 programs, including one that helps low-income Americans pay home-heating costs, block grants for community development, and Pell grants for low-income college students. Most cuts phase in after the 2012 campaign. The plan includes, too, $1.6 trillion in tax hikes and new investments in education, science, and technology "to win the future."
"We've taken a scalpel to the discretionary budget rather than a machete," the president said.
Contrary to the advice of Obama's fiscal commission, his budget map punts entitlement reform to future negotiations as far as two years out.
"This is going to be a process in which … both chambers of Congress ... start trying to whittle their differences down, until we arrive at something that has an actual chance of passage," Obama said. "This is a matter of everybody having a serious conversation about where we want to go and then ultimately getting in that boat at the same time so it doesn't tip over. And I think that can happen."
House Republican leaders call the president's budget plan a failure of leadership and a lost opportunity.
"We need to have an adult conversation on entitlements, and the president needs to lead that discussion," said Speaker John Boehner at a Feb. 17 press briefing. "He was elected to lead, not to sit on the sidelines. And it's also clear that we need to have a conversation with leaders in his own party who continue to deny there's even a problem."
In a pre-dawn vote on Feb. 20, the House voted to cut $61 billion from discretionary spending this fiscal year, which ends Sept. 30. Currently, the government is funded only through March 4.
On Tuesday, Senate Democrats proposed extending current spending levels for 30 more days, to April 3. Senate majority leader Harry Reid, citing the fiscal commission, says making federal spending cuts too soon could derail the nation's economic recovery. He is also drawing a line on future cuts to Social Security benefits. Social Security is not a factor in the US budget deficits and ought to be protected from cuts, he says.
"Congressional Republicans and the president are playing a game of budgetary chicken," says Steve Ellis of Taxpayers for Common Sense, a budget watchdog group. "Neither one ... wants to tackle entitlements or tax expenditures before the 2012 election. It may make for good electoral politics, but it's fiscally irresponsible."
Meanwhile, hopes for a breakthrough on deficit reduction rest on a bipartisan group in the Senate, launched by senators who served on the president's debt commission. Picking up conclusions of the commission, the group is addressing entitlement reform, an end to tax breaks, and caps on discretionary spending. But it's premature to say the senators are near agreement. "The group is committed to deficit reduction but nowhere close to a plan," an aide says.
In the 1990s, Congress instituted fiscal self-discipline by capping discretionary spending. Gradually, exceptions to those rules, including financing two wars, have blunted their usefulness. At the same time, entitlements have come to account for a larger share of US spending. The new wild card is how soon interest-rate hikes, expected as the economy recovers, will balloon payments on the national debt. It's the one element in the spending mix that Congress cannot legislate away.