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Obama unveils his budget plans Wednesday

WASHINGTON — President Barack Obama, in a speech today, will tell Americans more about how he favors mixing tax increases and cuts to Medicare and Medicaid to control long-term deficit spending.

But he'll be in for a rough time passing any such sweeping changes through a wary Congress before the next presidential election.

Republican leaders blasted Obama's speech even before they knew what he would say. House Speaker John Boehner of Ohio called any tax increase "unacceptable and a nonstarter," while Senate Republican leader Mitch McConnell, R-Ky., said Obama had to be "dragged into this discussion" on the fiscal crisis.

As if to prove McConnell wrong, Obama announced hours later that he was inviting bipartisan leaders from the House of Representatives and the Senate to come to the White House for a preview this morning of his afternoon address.

But Obama made it clear he won't go as far as House Republicans, who have written a plan to make dramatic changes in Medicare, the federal health care program for seniors and some disabled people.

That plan, due for a House vote Friday, is a "nonstarter," White House press secretary Jay Carney said Tuesday.

Stan Collender, a liberal, independent budget analyst, said he doesn't expect Obama to push now for major change to Medicare. Such a revamp, he said, "is a two-year debate. You're not going to rush into it."

Congress' best hope for changes in entitlement programs probably rests with the six senators, three from each party, who have been trying for months to negotiate a compromise.

The senators hope to have recommendations ready soon, and the primary motivator, they believe, will be the forthcoming debate over raising the $14.3 trillion debt limit.

While the White House is discouraging any deal-making tied to that vote, saying it could set off a global economic crisis, the threat of fiscal conservatives withholding their support could serve as leverage to negotiate at least incremental spending cuts.

Many Republicans and Democrats alike said Tuesday that they could not in good conscience authorize more borrowing unless Obama agreed to cap federal spending, adopt triggers to force rewrites of the tax code and entitlement programs, or accept some other binding mechanism for bringing the debt under control.

"We're going to require as a condition for raising the debt ceiling something really important," McConnell, the minority leader, told reporters. "That means no window dressing, no blue smoke and mirrors — something real, something measurable that clearly will begin to reduce our debt."

"It's not just Republicans," said Sen. Joseph Lieberman, I-Conn. "A lot of Democrats, including myself, are not going to vote to raise the national debt ceiling unless there is something concrete, real, tough done to guarantee that the debt itself will be reduced in the coming years."

Sen. Susan Collins, R-Maine, said Obama needs to go beyond talking in broad strokes in his speech today and to engage in specifics about what he wants and what he's willing to accept. "The president needs to set out his own plan."

Sen. Ben Nelson, D-Neb., another moderate, said Medicare could be "tweaked" before the 2012 elections, but he's not sure it can be overhauled.

And Sen. Rand Paul, R-Ky., said it would take "a crisis" to forge a bipartisan deal on major changes to Medicare.

With the debt expected to hit the ceiling by May 16, Treasury Secretary Timothy Geithner said he can take measures to push the deadline to July 8. Republican leaders made clear Tuesday that they plan to use the extra time.

House Majority Leader Eric Cantor, R-Va., said that buys some time to reach a deal on spending cuts, which Republicans will demand in exchange for any support of a higher debt limit.

House Republicans aren't poised to support tax increases on the wealthy, which Obama has said should happen after the economy recovers.

Carney wouldn't say Tuesday whether Obama supports a proposal to institute statutory budget controls with automatic enforcement mechanisms as a way to appease Republicans.

Under a plan promoted by some fiscal experts including former U.S. Comptroller General David Walker, spending cuts and temporary tax surcharges could be started in 2013 if targets aren't met to reduce debt as a percentage of the economy.

Deficit climbing

The $38 billion in spending cuts agreed to last week won't prevent this year's budget deficit from setting another record high, estimated at $1.5 trillion.

Most of the agreed-to spending cuts either affect future budgets or amount to accounting gimmicks that won't reduce actual spending.

The Treasury Department reported Tuesday that the deficit already totals $829.4 billion through the first six months of the budget year.

President Obama and congressional Republicans averted a government shutdown last week by agreeing to the largest-ever spending cuts for a single year. But David Wyss, chief economist at Standard & Poor's in New York, said those cuts amount to a "rounding error" in this year's deficit.

Wyss expects the deficit will surpass the record of $1.41 trillion hit in 2009.

The nonpartisan Congressional Budget Office raised its estimate earlier this year from $1.1 trillion to $1.5 trillion.

Information from the Associated Press and Washington Post was included in this report.

The president's speech

President Barack Obama will outline his budget ideas today in a speech scheduled for 1:30 p.m. It is expected to be shown on cable news networks.

Obama unveils his budget plans Wednesday 04/12/11 [Last modified: Tuesday, April 12, 2011 10:47pm]
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