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After Spending Binge, White House says it will focus on Deficits
President Barack Obama plans to announce in next year's State of the Union address that he wants to focus extensively on cutting the federal deficit in 2010 – and will downplay other new domestic spending beyond jobs programs, according to top aides involved in the planning.
The president's plan, which the officials said was under discussion before this month’s Democratic election setbacks, represents both a practical and a political calculation by this White House.
On the practical side, Obama has spent more money on new programs in nine months than Bill Clinton did in eight years, pushing the annual deficit to $1.4 trillion. This leaves little room for big spending initiatives.
On the political side, Obama can help moderate Democrats avoid some tough votes in an election year and, perhaps more importantly, calm the nerves of independent voters who are voicing big concerns with the big spending and deficits. Even if Obama succeeds - and that’s a big if - it will be tough for many Democrats to sell themselves as deeply concerned about spending after voting for the stimulus, the bailouts, the health care legislation and a plan to address global warming, four enormous government programs.
“Democrats have to reassure voters we are not being reckless,” said a Democratic official involved in the planning. “The White House knows this and that's why we'll be hearing a lot about reducing the deficit early next year. Democrats owned this issue for the past four years and cannot afford to cede it to Republicans now."
White House budget director Peter Orszag said in a statement to POLITICO: “The President strongly believes that as the recovery strengthens and job growth returns, we will have to take the tough steps necessary to return our nation to a fiscally disciplined and sustainable path. We recognize that the projected medium-term deficits are too high, and as part of the FY 2011 budget process, we are committed to bringing them down. Our challenge is to tackle those out-year deficits in a way and at a time that does not choke off economic recovery, and the FY 2011 budget will reflect our best judgment about how to walk that line."
The big question for Obama – and the country – is whether the sudden concern about deficits will be more rhetoric than reality once his first State of the Union address concludes.
All presidents promise deficit reduction – and almost always fall short. There is good reason to be skeptical of this White House, too, on its commitment.
For starters, the White House has not dropped plans for an aggressive global warming bill early next year that will be loaded with new spending on green technology and jobs – that would be paid for with tax increases. Democratic lobbyist Steve Elmendorf says the White House focus on deficit reduction could easily kill the cap-and-trade effort. “I think this means cap-and-trade has to go to the backburner,” he said.
Additionally, there is no evidence Democrats are willing to aggressively cut the biggest parts of the budget, such as entitlement programs and defense. Former President Bill Clinton told Senate Democrats at their policy lunch this week that one of the biggest reasons to finish health care is to allow Obama to focus on economic concerns next year – in part with more spending. Sen. Ron Wyden (D-Ore.) said afterward that Clinton had advised getting health care out of the way to “clear the tables and allow the focus to be on jobs and education and infrastructure.” None of that is free.
The Wall Street Journal reported Thursday the White House is considering applying some money from the $700 billion financial bailout bill to deficit reduction, and that Cabinet agencies have been asked to submit two budget plans for next year, one that freezes spending at existing levels and one that trims spending by 5 percent. Congress has long history of taking those requests and piling on money for programs it favors. The only way Obama can prevent Congress from imposing its will – a tactic he has been reluctant to do during his presidency – would be to threaten vetoes. And if Obama’s political goal is to minimize tough votes, gutting domestic spending bills could mean fewer projects lawmakers can brag about back home. History shows that that’s often an impossible sale on the Hill.
Kenneth Baer, White House Office of Management and Budget spokesman, said: "You'd have to be a graduate of Hogwarts to know what's in a speech that has not been written, much less outlined, yet. The President and his team are constantly reviewing and assessing policies to create jobs, lay the foundation for long-term economic growth, and put the nation on firm fiscal footing. No decision has been made about what specific policies will be in the FY 2011 budget or any address."
Officials involved in the planning say they're looking for ways to cut spending, reduce the growth in costs in other areas besides health care, and find ways to get Republicans to share the risk.
Obama will likely find himself squeezed between economic and political pressures for much of the year. Some White House officials do not want to focus on deficits until it’s clear the economy is in full recovery. It could take another jolt of tax cuts or spending to make that happen, these officials say.
“If we try to reduce the deficit much below what’s been projected, we really run the risk of undercutting the recovery,” said Jim Horney, director of fiscal policy at the Center on Budget and Policy Priorities, a liberal think tank.
But many moderate Democrats are deeply troubled by two recent signs of serious discontent among independent voters. The first was how badly Democrats lost among independent voters in the New Jersey and Virginia gubernatorial races. The second was a Gallup poll released this week that showed Republicans winning the independent vote by 22 points in generic matchups for House and Senate races. That same poll had the parties tied among independents in July.
Most of the competitive House and Senate races are in swing districts in which independent voters are the deciders.
“A lot of independents, Democrats and Republicans -- all are concerned about is what are we going to do about this long-term debt,” Obama told ABC’s Jake Tapper Monday. “We've got to show people that we are responsible stewards for their taxpayer dollars and that we're taking some serious steps to at least lay the foundation -- the pathway -- for bringing those deficits down over the next several years.”
Anthony Foxx: No Property Tax Hike for streetcar
Democratic mayoral candidate Anthony Foxx said Thursday he wouldn't raise property taxes to pay for a streetcar, despite his vote to move ahead with the project and suggestions from city staff that a hike may be needed.
"We aren't proposing or considering any increase in property taxes, and now would be a terrible time to think of that," he told the Observer. "I will not raise property taxes for the streetcar."
The streetcar and property tax issues came up when Foxx and Republican John Lassiter spoke to a luncheon of the Charlotte Regional Mortgage Lenders Association at the Myers Park Country Club.
Lassiter has also opposed property tax increases.
The rivals, both at-large city council members, were on opposite sides last month when council Democrats overrode Mayor Pat McCrory's veto of $4.5 million to start design work on the line.
The project, which would run from Johnson C. Smith University through uptown to Eastland Mall, would cost over $450 million. It's unclear where the money would come from.
"I could not promise to build something I didn't know how to pay for," Lassiter told the mortgage group.
Foxx defended his vote. He said the line would bring economic development to neighborhoods that need it. One study showed new development could generate $112million in new property taxes over 20 years.
"The future of our city is dependent on making every part ... a great place to live in," he told the group.
On Monday the city staff outlined ways to pay for the line to the council's Transportation Committee, which Foxx chairs. One option called for creating a special taxing district along the line and enacting a 4-cent tax hike for every $100 of taxable value. Another called for a citywide tax increase of 2 cents.
The city's current tax rate is 45.86cents.
"By supporting the streetcar, I'm not committing myself to a property tax increase," Foxx said later.
During the meeting, he defended his vote for a 2006 city budget that raised property taxes 9 percent - the first increase in at least a decade. Lassiter voted against the budget.
Foxx said the tax hike helped pay for the 70 new officers the police chief requested, more than in the no-new-tax budget supported by Lassiter and McCrory. It also brought in money for new roads and neighborhood improvements.
He suggested that without the tax hike, Charlotte's crime rate might not have gone down. Police say it's down 20percent from a year ago.
"You can't out a price on (a) family's sense of safety, put a value on the life saved because we had the additional police officers," he told the group.
Lassiter has criticized "unnecessary and unmanaged government spending" that he says had nothing to do with police, roads or neighborhoods.
Thursday he alluded to this year's General Assembly actions that raised the state sales tax by a penny and enacted surcharges of 2 percent or 3percent on some taxpayers. He told the mortgage lenders that he'll keep taxes down.
"We're in a high-taxed city in a high-taxed state," he said. "We've got to right the ship."
Republicans: Debt will bring Pres. Barack Obama down
Republicans on Capitol Hill think they’ve finally found Barack Obama’s Achilles’ heel: rising public concern about government spending and the federal deficit.
While Obama’s overall job-approval ratings are up over the past month, a Gallup Poll out this week has a 51 percent majority of Americans disapproving of the president’s efforts to control federal spending and a slim 48 percent to 46 percent disapproving of his handling of the federal deficit.
Those are the only areas where Obama has negative approval ratings — Americans approve, by double-digit margins, the way Obama is handling his overall job, foreign affairs, terrorism, the Middle East and North Korea. But the GOP will take what it can get.
“The president is still popular, but his policies are catching up with him,” said Tennessee Sen. Lamar Alexander, who, as the No. 3 Republican in the Senate, is in charge of messaging for his conference. “When that happens, it helps us make our points.”
Sen. John Cornyn (R-Texas), the head of the National Republican Senatorial Committee, told POLITICO that GOP candidates in 2010 will almost certainly use the deficit to argue that Democrats own a Washington mess.
“This was not an inherited situation. This was a matter entirely of this administration’s and this Democratic leadership’s making,” Cornyn said. “In large part, I believe, 2010 will be a referendum on their performance.”
When President George W. Bush left office, he left behind a $10.6 trillion national debt, which refers to the cumulative amount of money the government owes. That number now stands at $11.4 trillion, according to the Treasury Department.
The Congressional Budget Office projects that the annual deficit will grow to $984 billion for the first eight months of the current fiscal year, compared with a $319 billion shortfall for the same time period last year. In 2012, under Obama’s budget, the CBO estimates that the deficit will fall to $658 billion.
Democrats argue that Bush left them with an economic mess and two wars, and they say that the country needs to spend money to get its way out of financial calamity. Eventually, they say, the government will see increased tax revenues as the economy improves, and it will be repaid by the banks and auto companies that have secured massive loans to stay afloat.
Two members of Democratic leadership — Washington Sen. Patty Murray and New York Sen. Chuck Schumer — said they’re not worried about Obama’s poll numbers over the deficit.
“The reason we are where we are is because of a war that was spent off budget for many years when nobody talked about the deficit — and put us where we are today,” Murray said. “We are working our way out of this, and I think in the most reasonable way we can.”
At the White House on Tuesday, Obama promised to cut the deficit in half in four years and decried “the reckless fiscal policies of the past.” He laid out legislative plans to restore more fiscally restrictive budgeting by enacting into law so-called pay-go rules, which would require that new revenues or spending cuts accompany any new program that would otherwise add to the deficit.
“We are confronting the worst recession this country has faced in generations,” Obama said. “This has required extraordinary investments in the short term. Another imperative is addressing long-deferred priorities — health care, energy, education — which threaten the American economy and the well-being of American families. We have begun to tackle these problems as well.”
But some of Obama’s fellow Democrats have been wary of domestic initiatives that could drive up the deficit. Sen. Mary Landrieu, a conservative Democrat from Louisiana, said Tuesday that she would support a private-sector model with “significant protections for consumers” for health care — but not a public option run by the government.
“If we would take that step, not only would we get health care but we would save money,” Landrieu said of her preferred approach. “So that goes to the positive side of deficit reduction, not the negative.”
Sen. Ben Nelson of Nebraska, one of the Senate’s most conservative Democrats, senses a risk for his party on the deficit issue.
“I do believe that we need to make every effort to get our hands around it and not let it just be on auto-pilot; then the American people will understand that, and that will eliminate part of the political risk,” Nelson said. “But if it appears that there is not a strong focus on it and there is no sufficient effort to try to control it, then I think it’s a major political risk.”
And the Senate Budget Committee chairman, Kent Conrad (D-N.D.), was critical of the White House’s pay-go plan for proposing that the budgeting process need not apply to Medicare payments to physicians, patching the alternative minimum tax and for Bush-era tax cuts.
“While I very much favor putting statutory pay-go back on the books, I don’t support waiving pay-go for trillions of dollars of items that I think have to be paid for,” Conrad said Tuesday.
Republicans are eager to capitalize on such concerns, with Senate Minority Leader Mitch McConnell (R-Ky.) repeatedly making speeches attacking Democrats’ spending and health care proposals — a slow-build tactic similar to the one he employed over Obama’s proposal to close the Guantanamo Bay detention facility.
Said Alexander: “We respect the president, we understand he’s popular, but when it comes to debt, housing credits, getting government ownership and the car companies out of Washington, D.C., a government-run health plan, we’ve got issues — and what’s beginning to emerge, I think, is two words: Washington takeover.”
Sen. Tom Carper (D-Del.) cited a number of efforts under way to recoup costs from the economic crisis but acknowledged that Democrats need to make controlling spending part of their message.
“Part of our brand has to be, ‘We know how to spend money effectively,’” Carper said.
National Debt hits record $11 Trillion
The eye-popping national debt surpassed $11 trillion Monday, the largest in U.S. history.
The new Treasury Department figures on the national debt were released as the non-partisan Congressional Budget Office is expected to project that the annual budget deficit will be higher than previously estimated by the White House's Office of Management and Budget. The debt, which refers to the cumulative amount of money the government owes, hit $10.9 trillion on Friday.
The whopping number has major ramifications for President Barack Obama, who is trying to push through a raft of big-ticket bills on health care, energy, education and climate change — while also attempting to stabilize the swooning economy.
Sen. Kent Conrad (D-N.D.), chairman of the Budget Committee, said Tuesday that the numbers could force Congress to make "adjustments" to Obama's $3.6 trillion budget plan.
"It’s very important get a result for the American people and one that has the priorities that have been [announced] by the president in terms of reducing our dependence on foreign energy, that’s in all of our interests, excellence in education, health care reform and dramatic reduction of the deficit,” Conrad told reporters. “Those will be our guiding principles as we go forward, but as I say, we’ve not yet seen CBO’s new numbers. But I think we can all anticipate because they were done substantially later than OMB’s, that they are going to be more adverse. That that’s going to require all of us to make adjustments.”
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Sources: Politico, MSNBC, McClatchy Newspapers, Charlotte Observer, Charmeck.org, North Carolina Google Maps
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