Sharp Divide Over Spending and the Debt Could Renew Budget Warfare
Policy + Politics

Sharp Divide Over Spending and the Debt Could Renew Budget Warfare


Even before President Obama formally unveils his new budget for fiscal 2017 Tuesday morning, the lame duck administration and the Republican majority in Congress have begun drawing sharp lines in the sand that could precipitate another fiscal crisis later this year in the runup to the November presidential election.

Just two months ago, Congress approved a two-year spending and tax break agreement that gave Obama tens of billions of dollars more for domestic priorities and gave the GOP a similar amount for defense and national security. The deal worked out by outgoing House Speaker John Boehner (R-OH), the administration and congressional Democrats appeared to have paved the way for a fiscal and budgetary armistice while voters deliberated over the field of presidential candidates.

Related: Tea Party Revolts Against Obama’s Budget as Debt Exceeds $19 Trillion

Instead, the mood has swiftly soured, putting a budget deal at risk. The controversey is pitting the president’s continued concern about spending for important Democratic programs against the Republicans’ renewed fears about the deficit and the long-term national debt that just breached $19 trillion last week.

Obama and his top advisers have repeatedly signaled that his final year in office will be marked by an array of new spending: including an additional $2 billion in federal Pell Grants for college students, a new tax on oil to increase American investment in environmentally “clean” transportation infrastructure, an additonal $1 billion for cancer research, more money to reform and expand the availability of unemployment insurance, and much more.

“Under the President’s leadership, we have turned our economy around and our businesses have created 14 million jobs since February 2010,” White House Budget Director Shaun Donovan said last week in a government blogpost. “But as the President said in his final State of the Union address, there is more work to be done to meet our greatest challenges and seize the opportunities before us.”

“The Budget . . . makes smart investments to accelerate the pace of innovation to tackle climate change and find new treatments for devastating diseases; gives everyone a fair shot at opportunity and economic security; and advances our national security and global leadership,” Donovan added.

Related: As National Debt Hits $19 Trillion, a Spending Showdown Looms in Congress

But House and Senate GOP budget leaders have a much different agenda in drafting a new budget plan for the fiscal year that begins next Oct. 1. And it mostly has to do with their perceived need to cut runaway expenses of Medicare, Medicaid, Social Security and other entitlement programs to address a renewed threat from the deficit and a surging national debt.

The deficit tumbled mightily in recent years as the economy improved and the Budget Control Act was implemented. It now is a far cry from the $1 trillion dollar levels in the depths of the Great Recession. However, the non-partisan Congressional Budget Office warned in January that the 2016 deficit would total $544 billion -- $105 billion more than the deficit reported last year and 2.9 percent of the Gross Domestic Product.

Assuming the CBO is right, that will mark the first time the deficit has risen in relation to the size of the overall economy since it peaked at 9.8 percent of GDP in 2009. The budget deficit will increase “modestly” through 2018, according to CBO, but then it will start to rise sharply until it reaches $1.4 trillion in 2026.

The CBO projections – including a forecast that the overall national debt held by the public would be the equivalent of 86 percent of the economy within a decade – touched off a backlash against the administration by Sen. Mike Enzi (R-WY) and Rep. Tom Price (R-GA), the chair of the Senate and House Budget Committees.

Related: CBO Predicts First Deficit Spike Since 2009 

Last week, Enzi and Price took the unprecedented action of announcing they were barring Donovan, the director of the Office of Budget and Management, from testifying before their committees this week on the president’s new budget.

“It appears the President’s final budget will continue to focus on new spending proposals instead of confronting our government’s massive overspending and debt,” Enzi said. “It is clear that this President will not put forth the budget effort that our times and our country require.”

Congressional Democrats and administration officials were angered and dumfounded by the two budget committee leaders’ decision to reject any input from the White House on a new budget and instead go their own way. House Democrats yesterday urged Enzi and Price to reconsider their decision.

“I think this is a low point in the budget committees’ history,” Bill Hoagland, a vice president of the Bipartisan Policy Center and a former senior Republican budget adviser in the Senate, said in an interview yesterday. “We all know that this is going to be a difficult last budget for the president to get too much done in this shortened time frame up there. And I always refer to president’s budgets in their last year of their second term as ‘aspirational.’ But that doesn’t mean that you can’t accept it and hear about it and listen to it, and then produce your own aspirational budget, which I assume it will be,” he added.

Related: Why Is Congress Giving Away $500 Billion in Unfunded Tax Cuts?

Indeed, Enzi and Price in their first years heading their respective budget committees last year produced a budget that won approval in both chambers designed to balance the budget within ten years. They would achieve that goal through a series of tough cuts and savings in most entitlement programs and other social-safety-net programs – and without raising taxes. The budget preserved spending caps on domestic and defense programs approved as part of the 2011 Budget Control Act, despite calls from both parties to raise the caps.

In the end, that GOP-passed budget was so draconian that neither party took it seriously. It was laid aside late in the year when a bipartisan deal on a $1.1 trillion omnibus spending bill for the remainder of fiscal 2016 was struck that included renewal of generous tax breaks and write-offs that had expired.

That deal – which members of the archconservative House Freedom Caucus reluctantly allowed to be enacted without their support – gave many hopes that the budget debate this year would go relatively smoothly. But in a surprise development, Freedom Caucus members are threatening to rebel against a new budget over an additional $30 billion of domestic and defense spending that was authorized under last December’s deal.

Related: How the Presidential Candidates Would Confront $18.6 Trillion of U.S. Debt

Having forced Boehner to retire late last year after years of disagreement over spending, Freedom Caucus members are now pressuring the new House speaker, Paul D. Ryan of Wisconsin, to literally renege on last year’s agreement and revise spending authority at lower levels.

“We’re troubled by the number . . . and we’re trying to work with members and leadership and see where we go,” Rep. Jim Jordan (R-OH), the chair of the Freedom Caucus, told The Washington Post. Jordan and the others are also calling on Ryan and Price to return to the tough budget numbers in the GOP budget before Boehner struck the final agreement or else come up with some way to offset the $30 billion of additional defense and domestic spending.

The Obama administration boasts that it has reduced the deficit by nearly three fourths as a percentage of GDP since taking office, while acknowledging, “There’s still work to be done.”

But as will no doubt become abundantly clear from his latest -- and final -- budget plan for spending more than $4 trillion on discretionary programs, entitlements and interest on the debt in fiscal 2017, the president will be far more committed to his spending initiatives than in taking one more big stab at controlling the debt.

“There won’t be a new budget deal this year no matter what the president proposes,” wrote Stan Collender, a federal budget expert, wrote in Forbes. “Not only is there no precipitating event like a debt ceiling expiration to force negotiations (another Boehner gift), but there’s nothing Republicans and Democrats want or expect this year. Both sides prefer to do tax and entitlement changes after the election when Republicans are hoping for a GOP president and Democrats hope they’ll retain the White House and gain a majority in the Senate.”