Bloomberg News

Lawmakers Look to November Elections to Break Deficit Gridlock

February 21, 2012

Feb. 10 (Bloomberg) -- The budget plan President Barack Obama will present to Congress Feb. 13 will be all about choices -- especially the one that voters will make in November.

“Why make any compromises before then?” said Bob Bixby, head of the Concord Coalition, a non-profit group that advocates for a balanced budget. “Both sides seem prepared to roll the dice and gamble they’ll be put in charge.”

Obama will submit to Congress an election-year spending plan for the fiscal year beginning Oct. 1 that will draw on his earlier proposals and highlight the contrast with his rivals on issues including higher taxes for the wealthy and spending on programs to boost jobs and the economy.

Obama’s four-volume package will be based in part on the 10-year, $3 trillion deficit-reduction proposal he offered unsuccessfully to Congress in September.

That plan would allow the Bush-era tax cuts for families earning more than $250,000 a year to expire Dec. 31 and end some deductions and exclusions, which the White House says would net the Treasury more than $1 trillion over a decade. Obama also is proposing a so-called Buffett rule, named after billionaire Warren Buffett, to require those earning more than $1 million a year to be taxed at a minimum rate of 30 percent.

“Take the State of the Union speech and just translate it into dollars,” said Barry Anderson, who was a staff member in the White House budget office through several administrations.

Election Stakes

Representative Paul Ryan, chairman of the House Budget Committee who plans to offer an alternative budget, said the future of the Bush tax cuts is “clearly one of the highest stakes of this election.”

Obama is seeking tax incentives for jobs and will request more aid for students, among other initiatives. Resolving the partisan budget fight may be impossible until the end of the year, when the election is over and deadlines start stacking up.

A deficit reduction law passed last year requires $1 trillion in discretionary spending cuts spread over 10 years, half from defense. The reductions would start in January 2013 if Congress and the administration can’t agree on an alternative plan. At the same time, the government will again brush up against its debt limit, reviving the specter of default.

The deficit-cutting deadlines will come less than two months after the Nov. 6 elections to determine control of the White House and Congress.

Consequential Vote

“They’re all going to come to a head right after the election,” said Representative Henry Waxman, a California Democrat. “The American people ought to figure out that elections do matter” because “important decisions will be made based on how they vote.”

The administration is downplaying the economic forecast contained in the budget plan, which projects an average unemployment rate of 8.9 percent this year and 8.6 percent next year. The forecast was completed in mid-November and more positive jobs data since then makes those figures “stale and out of date,” White House chief economist Alan Krueger said in a statement Feb. 8.

“We would certainly lower our forecast of the unemployment rate from the figures that will appear in Monday’s budget if we were to do another forecast today,” he said. He didn’t give a specific number.

An administration official, speaking on condition of anonymity because the White House hasn’t set a formal revision, said the president’s advisers expect the economy would create 2 million jobs next year, if Obama’s economic proposals are passed by Congress.

Budget Preview

Among Obama’s proposals are $1 billion for a Veterans Job Corps program, more aid to students at universities that rein in tuition costs and a mortgage-relief plan financed by a tax on financial services companies.

Obama has pushed to eliminate tax breaks that the administration says reward companies for sending jobs overseas, and instead offer incentives for businesses that invest in communities hit by manufacturing job losses.

Republicans promise a sharp response. Ryan, a Wisconsin Republican, said his budget plan will offer “a choice of two futures, our vision, our solutions versus the path the president is putting us on.”

Ryan’s plan will probably reprise his call last year to overhaul Medicare by offering vouchers to buy private health insurance while reducing taxes. “If we get the majorities and the White House, we’ll break” the deficit gridlock, he said.

Ryan’s Budget Plan

Democrats, meanwhile, are already reviving their complaints that Ryan’s budget will “end Medicare,” which the nonpartisan PolitiFact.com called last year’s ‘Lie of the Year.’ “If you thought Medicare was safe from House Republicans, guess again,” the Democratic Congressional Campaign Committee said in an e- mail to reporters.

Even on items where there’s agreement by both parties on the goal, the process is stalled. Lawmakers have been unable to make progress toward what most consider the only must-do item on this year’s pre-election agenda: extending unemployment benefits and a payroll tax break set to expire at the end of this month.

Voters say they want action on the deficit. Sixty-nine percent consider it a priority, the most since 1994, ranking just behind the economy and jobs, according to a poll last month by the Pew Research Center for the People and the Press.

The only certainty this year is a “witches brew” of partisanship, said Stan Collender, a former congressional budget analyst. The election, influence of the Tea Party and narrow majorities in the House and Senate makes any action on the budget almost impossible, at least before November, he said.

“Expect the phrase ‘dead on arrival’ to make a triumphant return on Capitol Hill” when Obama’s budget is submitted, Collender, managing director of Qorvis Communications in Washington, said. “Why does anyone think that the intractable politics of 2011 that led to the failure of every budget related efforts will be any different in 2012?”

--Editors: Jodi Schneider, Joe Sobczyk

To contact the reporters on this story: Brian Faler in Washington at bfaler@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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