Obama Sets Stage For Big Budget Showdown with GOP
Policy + Politics

Obama Sets Stage For Big Budget Showdown with GOP

While both Obama and GOP leaders have called for compromise in helping middle-class Americans and in strengthening the military in light of new terror threats – the president struck a largely defiant tone yesterday.  Declaring that “America’s resurgence is real” and that the nation has successfully emerged from the Great Recession, he set the stage for a bruising battle with Congress over spending and taxes for the next two years.

Related: Obama Would Violate Budget Control Act with $34B More for Defense 

Obama confirmed in an op-ed in The Huffington Post that he’ll ask Congress to permanently lift spending caps on both domestic and defense spending to fund new programs and tax breaks targeted to the middle class and the military.  

The president will propose about $74 billion more in discretionary spending in fiscal 2016 than permitted under caps mandated by the 2011 Budget Control Act. In the unlikely event Congress approves that proposal, it would constitute roughly 7 percent more in funding for programs other than entitlements and interest on the debt.

Despite concerns among many GOP leaders that the budget deficit could grow again after several years of decline, Obama seems eager for a spending spree.  

“I’m proposing we make the kinds of investments we need to continue to grow our economy and enhance our national security,” he said in the written statement.

Related: Obama Touts ‘Middle Class Economics’ at State of the Union

“If Congress rejects my plan and refuses to undo these arbitrary cuts, it will threaten our economy and our military,” he cautioned.

The Congressional Budget Office issued a report this week projecting the deficit would total about $468 billion this year and next, its lowest levels since 2007. Yet the deficit and the national debt will gradually rise as baby boomers retire and make greater demands on Social Security, Medicare and other entitlement programs.

The latest CBO projection shows the deficit climbing from $540 billion in 2015 to $948 billion in 2022 – and to more than $1 trillion in 2025. The cumulative deficits over 2016-to-2025 would total $7.6 trillion.

Related: Boehner and McConnell Skewer Obama’s SOTU Plans

This is the second consecutive year Obama has proposed ending sequestration. He traveled to Philadelphia last night to meet with House Democrats at a caucus retreat to share details of his 2016 budget plan. 

Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee, praised Obama’s call for ending sequestration. “Arbitrary cuts through sequestration never made sense, and House Democrats have consistently supported replacing them with a smarter, more balanced approach to long-term deficit reduction,” he said in a statement.

Many Republicans, however, were outraged by Obama’s proposals.

Senate Finance Committee chair Orrin G. Hatch (R-UT) told The Washington Post that Obama was the most fiscally irresponsible chief executive ever. “I don’t know why he doesn’t see it,” said Hatch.

While some GOP leaders, including Senate Armed Services Committee Chair John McCain (R-AZ) and House Armed Services Committee Chair Mac Thornberry (R-TX), favor lifting the caps to bolster defense spending, others favor retaining them to avert a return to trillion-dollar annual deficits.

Related: The Economic State of the Union in 7 Charts

The automatic spending cuts first took hold in 2013 but were eased in 2014 and 2015 under a bipartisan budget deal negotiated by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI). But the caps are set to return this year unless Congress and the White House can work out another compromise.

Newly ensconced House Budget Committee Chair Tom Price (R-GA) said  this week that Washington still has a major spending problem – and that the U.S.’s fiscal and economic concerns are getting worse. Price and Sen. Mike Enzi (R-WY), the new chair of the Senate Budget Committee, have vowed to pass a 2016 budget resolution by this spring that would rein in spending and work toward a balanced budget in the coming decade.

Joseph Minarik, a former senior budget official in the Clinton administration, said that he sees ominous signs as the GOP leadership and Obama brace for another contentious round of negotiations over spending and taxes – especially with the 2016 presidential campaign looming.

Related: Obama’s About-Face on 529 Plans Could Save the Middle Class a Bundle 

“From all the things we have heard, including the State of the Union address, there’s no sign the president has any particular ambition to work with the Republicans in the Congress to try to ease the long-term fiscal imbalance,” said Minarik.

“The budget will arrive on Capitol Hill next Monday morning if it’s on schedule and will be declared dead on arrival,” added Minarik, senior vice president at the Committee for Economic Development. “That’s the formula. And we’ve got method acting on both sides.”

Top Reads from The Fiscal Times: