Published April 14, 2011
Small Deficit Cuts Imperil Spending Deal
“I'm leaning against the CR at this point, but I'm not quite sure. At the end of the day, I need to look at the specificity that is in the CR so that I can make a rational, reasonable decision for the constituents of the 1st District as well as for all Americans.”
-- Rep. Tim Scott, R-S.C., a freshman delegate in the GOP House leadership, talking to FOX News about the compromise plan to fund the government for the remainder of the fiscal year, called a continuing resolution or “CR.”
A report from the Congressional Budget Office that says a compromise spending deal between President Obama, Speaker John Boehner and Senate Majority Leader Harry Reid would cut but $352 million from this year’s deficit has cast deepening doubts on the prospects for its passage.
The current emergency-funding bill on which the government is operating expires at midnight Friday. If the House and Senate can’t both pass the legislation by then, the government shuts down.
Liberal Democrats remain opposed to the plan because of its trims and because of policy points, like its restriction of abortion subsidies, but a rebellion is spreading among conservative members of the House and Senate.
The problem is that in heralding the deal, Obama, Boehner and Reid played up $39 billion in cuts, which were assumed to be for the current fiscal year. But those cuts include some gimmicky accounting and the savings obtained from not tapping reserve funds for programs like Medicaid.
When the CBO crunched the numbers on how the deal would affect the projected $1.65 trillion deficit for this year, the result was a reduction of .02 percent.
“It’s worse because of the expectations,” an aide to a conservative House member who is on the fence on the vote told Power Play. “We knew that not all of the $39 billion would be real cuts, but to find out that almost none of it was real was very disappointing.”
Writing at Politico today, Boehner allowed that while the deal “isn’t cause for celebration or back-patting” it is better than the CBO score suggests because it eliminates the opportunity for Obama to have dipped into those additional billions this year. Boehner also points to $315 billion in reductions to future year spending by the elimination of reserve funds.
The $39 billion figure trumpeted on Friday includes the $10 billion in spending cuts already agreed to as part of emergency funding measures to keep the government operating since March 4. Those reductions had set expectations high among conservatives that the final deal would be a deficit buster.
“We were getting $2 billion a week,” said one Senate GOP aide. “Then we end up with $350 million for six months?”
The House is set to vote on the plan this afternoon. Remember that for every Republican beyond the first 24 that rejects the bill, Boehner will need a Democrat to take his or her place. Boehner lost 54 members -- 22 percent of his caucus -- on the vote for the previous three-week emergency spending plan. A loss of that scale here would have to be counted as good news in the Speakers’ office.
While House Minority Whip Steny Hoyer hasn’t committed himself publicly, the expectation still today is that he and his fellow fiscal moderates will deliver the votes needed to get the deal done and on to the Senate.
The real danger zone for the deal would be around 70 Republican defections. That would cast doubt on whether there are enough moderate Democrats to fill the gap and get to the requisite 217 votes. It would also be nearly a third of the Republican caucus in opposition, a weak showing for the GOP ahead of the even bigger battle over Obama’s request for an increase to the government’s $14.3 trillion borrowing limit.
Bond buyers will be watching for major fractures here. If the House GOP is in a riot, watch U.S. debt prices start to climb.
Leadership aides have been stressing the difficulties of reducing the deficit over a short period of time, pointing out that even the full Republican plan wouldn’t have achieved a $61 billion reduction in the deficit this year.
“You can take away their credit cards, but you can’t make them return what they’ve already bought,” said one House GOP leadership aide.
The message to House members hanging on the fence on today’s vote is that they should accept an imperfect compromise and then focus on the 2012 budget, which will be offered up immediately after the vote as something of a palate cleanser.
“We have to move on to the fight for the future, not get bogged down cleaning up the Democrat’s mess from last year,” the leadership aide said.
Even if the measure survives in the House, though, there’s a chance that the most conservative members of the Senate may block the bill for at least some period of time in protest of the size of the spending cuts. The $352 million number from the CBO has won no friends there.
While one Senate aide steeped in Tea Party considerations said that there wasn’t a plan to blockade the bill (any Senator can hold up legislation with an old-fashioned Mr. Smith-style filibuster) another suggested that the “bait and switch” on the budget numbers made the chances of at least a symbolic shutdown better.
“At some point we have to make sure that we are being heard and that Washington is taking the demands of the American people seriously,” he said.
Obama Tacks Left in Debt Speech
“One vision has been championed by Republicans in the House of Representatives and embraced by several of their party’s presidential candidates…This is a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit. And who are those 50 million Americans? Many are someone’s grandparents who wouldn’t be able to afford nursing home care without Medicaid. Many are poor children. Some are middle-class families who have children with autism or Down’s syndrome. Some are kids with disabilities so severe that they require 24-hour care. These are the Americans we’d be telling to fend for themselves.”
-- President Obama denouncing GOP proposals to overhaul Medicare and Medicaid
President Obama tonight will head to Chicago for a major fundraising mission as he begins to amass his billion-dollar war chest. And the members of his donor base should be primed to start writing checks after what they heard from the president Wednesday.
In a lengthy speech on debts and America’s “obligations” Obama tore into Republican proposals, preached on the virtues of increasing taxes and suggested that GOP efforts to overhaul entitlement programs would result in suffering for the elderly and disabled.
When Obama held that many rich people want to pay more taxes, you could tell that the speech was out of the blue haze. Maybe Warren Buffet likes the idea of higher taxes, but Power Play doubts that guy who owns a dry cleaning shop is itching to pony up another five percent of his income.
After taking sustained heat from the left over a series of compromises with Republicans stretching back to December, Obama sought to assert his liberal bona fides and did so in rather forceful fashion.
This is not an avenue to success in the general election at a time when the American electorate is deeply concerned about an exploding national debt and a shaky economy. But Obama needs to cover up his left flank, and his forceful denunciations of Rep. Paul Ryan’s budget, much detested among liberals, may help do that.
But note well that Obama is meeting today with the chairmen of his commission on debt, Alan Simpson and Erskine Bowles. One of the topics will surely be how to get the commission’s proposals, antithetical in some ways to Obama’s plan, enacted. Liberals hate that plan a great deal because it actually lowers tax rates and changes eligibility requirements for entitlement programs. The Simpson-Bowles plan is much closer to Ryan’s plan than what Obama sketched out in his bromidic lecture on Wednesday.
Call this the 2012 two-step. Obama will spend the next several months placating (and raising money from) liberals. Then, this fall, he will start jogging to the center. Today, he calls for tax hikes and warns of nursing home patients tossed into the streets. In October, he will be talking about the need for austerity and bipartisanship. Then, with the next fiscal year underway, Obama could reluctantly accept a compromise proposal crafted in the Senate by the six members of his debt commission working on the plan. He’ll do it to cut the debt and save the nation from a… government shutdown.
But for Obama to pull off his plan, he will first need to get past the looming vote on his debt ceiling request.
With conservatives feeling like they got snookered on the spending plan for the current fiscal year, the price they will demand in exchange for Obama’s debt-ceiling request is going up.
Speaker John Boehner has suggested that Republicans will tie Ryan’s budget to the debt request. The White House is trying to hold the line that it is non-negotiable – an increase or else “near Armageddon.” Playing a debtor Clint Eastwood, Treasury Secretary Tim Geithner told PBS Wednesday, "Congress will pass an increase in the debt limit.”
The mood among Republicans on the Hill today is pretty darned near Armageddon already, so Geithner may want to holster the Magnum Force.
Obama’s speech fell directly into three of the four big pitfalls awaiting it: He talked too much about taxing, the speech worsened the chances of passing his short-term budget deal and put too much pressure on the “Gang of Six” in the Senate.
That’s a lot to sacrifice in order to fire up the base. Maybe the president is more concerned about a primary challenge than he lets on.
And Now, A Word From Charles
“I'll give you one example of how dishonest it was. He went on and on how the Republicans want to steal from your grandma to lower taxes on the rich. He talked about the Bush tax cuts and how he will stand on the bridge and oppose any extension, which is what he knows how to do. He has done it over and over for the last six years. The Ryan plan is not about the Bush tax cuts. It transcends them. It's what the deficit commission recommended, strip out loopholes and lower rates for everyone.”