Obama's Budget Fight Starts with His Own Party

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Time

It's not exactly the can-do, uplifting message that President Barack Obama or congressional Democrats want to deliver to the voting public. But in the face of soaring deficit projections and growing Republican and moderate Democratic opposition to the Administration's $3.6 trillion budget plan, it may be the best they can do. And so, when the President journeyed to Capitol Hill on Wednesday to rally his party's support for his agenda, he sought to make a counterargument to the rising chorus that wants him to scale back his ambitious plans to reform health care, energy and education even as he tries to save the economy and cut the deficit.

"The real question is, Are we going to have a huge deficit with investment or a huge deficit without investment?" said Senator Carl Levin, a Michigan Democrat, emerging from the meeting. "Those are my words, not [Obama's], but I'm kind of summarizing what the argument is here. If you eliminated his investments, you'd find the deficit would still be 80% or 90% of what it would be otherwise with his investment." In other words, since Washington is going to rack up massive deficits, it may as well go all in and get some long-term bang for its buck. (See 25 people to blame for the financial crisis.)

Whether that kind of argument will convince fiscal conservatives and deficit hawks in Congress remains to be seen. Obama's visit to the other end of Pennsylvania Avenue came as the House and the Senate budget committees each introduced their own version of the bill, and less than a week after the Congressional Budget Office estimated that the 10-year shortfall would be $2.3 trillion greater than the White House's more rosy projections. Both chambers delivered on their recent promises to make sizable cuts to Obama's budget resolution, which is more of a blueprint for future spending than any kind of binding legislation. But the Administration put its best spin on the differences, arguing that Congress's offerings retained the commitment to the President's four "core principles" — universal health care, expanded education aid, renewable-energy investments and regulation of greenhouse gases, and provisions to halve the deficit in five years.

"Not only do [the House and Senate versions] embody the four key principles that the President has put forward for the budget, but they are 98% the same as the budget proposal the President sent up in February," White House Office of Management and Budget Director Peter Orszag told reporters on a conference call on Wednesday morning. "The resolutions may not be identical twins to what the President submitted, but they are certainly brothers that look an awful lot alike."

Still, even small differences can cause major rifts in families, and the competing budgets suggest the challenges Obama's agenda faces. Both the House and Senate, after all, removed Obama's $250 billion–$750 billion placeholder request for more bank bailout funds. And they both slashed the Administration's proposed 10% increase in nondefense discretionary spending (for education, environment and health initiatives, among other things), to 7% in the Senate and 7%–9% in the House. The Senate stripped the President's signature middle-class tax cuts, known as "Making Work to Pay," of $400 for individuals and $800 for families. The Senate plan, crafted by Budget Committee chairman Kent Conrad of North Dakota, also notably does not include any targeted funding to bankroll health-care reform, as Obama's does with $634 billion over 10 years. "When you lose $2.3 trillion, you have to cut things," said Conrad, whose plan includes $160 billion less in discretionary spending over five years than the President's, with a target deficit of $508 billion in 2014.

To some degree, Congress scaled back Obama's budget by resorting to the same kinds of accounting gimmicks the President had prided himself on avoiding, a fact Republicans were quick to point out. It dropped the long-term inclusion of the costly Alternative Minimum Tax fix — an annual must-pass bill to prevent the tax once intended for the superrich from hitting the middle class — and opted for a shorter time line of just five years vs. the 10-year budget the White House had crafted. "Given the state of the economy, everyone agrees that it's very difficult to predict the next five years," said Senator Mark Pryor, an Arkansas Democrat, "let alone 10 years."

The House bill includes a controversial provision for so-called reconciliation — which would leave the door open to piggyback massive programs on the budget like universal health care in case they fail to make it through the regular legislative process. House Democrats and the Administration support such a move specifically for health care — though, theoretically, the provision would allow for anything, including energy, to be pushed through the Senate with just a simple majority rather than a filibuster-proof 60 votes. Several moderate Democratic Senators, including Ben Nelson of Nebraska, have said that inclusion of reconciliation instructions in the final bill would be a deal breaker for them. "Reconciliation is not where we'd like to start, but we are not willing to take it off the table," Orszag said.

Republicans latched on to the gap between Obama's budget request and the Democratic caucus' counteroffer as evidence that Obama's budget is "so far out of the mainstream" that even members of his own party won't support it, said Representative Eric Cantor, the No. 2 Republican in the House. Almost all Republicans in both chambers oppose the budget, though there are a few moderates still making up their minds. "I intend to listen, and I intend to be willing to think about things," Senator Arlen Specter, a Pennsylvania Republican, told reporters on Wednesday.

Both chambers are expected to pass their respective versions by the end of next week, and then the real fun begins, as members work to hammer out the differences into a final bill. During this process, everyone, Obama noted at the Senate lunch, will have to give a little.

Given the GOP opposition, support from a group of moderate Democrats known as the Gang of 16 (led by Senator Evan Bayh of Indiana) is essential. Although most insisted that Obama's presence on Capitol Hill was not a sales job, the luncheon was dominated by talk of his budget. "These initiatives — education, better health care — are not free," said Senator Mary Landrieu, a Louisiana Democrat, who asked Obama about a provision she strongly opposes that would raise taxes on independent oil and gas producers. "But he was very open to consider some of those changes, which is what I wanted to accomplish."