Congress Bitterly Divided Over How to Fix the Budget

Most Republicans say if the nation doesn't cut deficit spending, the country is headed for disaster. But some Democratic leaders say it's the other way around, and the disaster will come if spending is cut.

The debate heated up this week when House Budget Committee Chairman Paul Ryan announced that for the rest of this year he hopes to cut non-security spending by $32 billion compared to current spending levels.

Some Democrats ridicule the number, because it is lower than Republicans had hoped to trim.

Republicans responded by saying the budget year will be almost half over by the time they can implement cuts, so reductions cover fewer months of spending. And they exempt defense, homeland security and entitlements such as Social Security and Medicare.

In addition, Democratic leaders warned Republicans this week not to shut down the government over spending, but no Republican leaders are arguing for that.

Aside from whether Republicans will eventually cut as much as they hoped, there is a more immediate issue.

Many critics argue any cuts right now would jeopardize the recovery and would be too harsh on the poor and key agencies. But that raises a troubling question. Those in both parties argue that federal spending must be cut to avoid a financial crisis, but cuts of a mere $32 billion would cripple the federal government?

After massive spending increases over the past two years, it is hard to imagine that a sum even Democrats ridicule for being too small could possibly be that devastating for the federal government or the recovery.

Republicans point to one example, the Environmental Protection Agency.

In 2008, the EPA's budget was $7.6 billion a year. By 2010, it had leapt by some 35 percent to $10.3 billion. Not only that, but it also got $7.2 billion from the stimulus bill, a sum roughly equal to its entire 2008 budget.

Has the agency's responsibilities increased by 35 percent in two years? How is it using the more than $7 billion in stimulus money?

What is the reason for such a whopping increase? Clearly, the poor and elderly are not going to be thrown out into the cold if the huge increases in the EPA's budget are trimmed.

In the coming days, the debate will get down to details like these, as the two parties argue over how deeply federal spending can be cut and what the consequences will be.

On February 14th, President Obama will present his budget proposal for the fiscal year beginning next October, fiscal year 2012.

Some Democratic leaders acknowledged the need to cut spending. Senator Richard Durbin of Illinois says, "I'm a realist; I think we're going to end this year with some spending cuts." But he adds, "Let's do it in a sensible fashion so we don't kill the recovery and we don't stop the basic functions of government."

Will $32 billion in spending reductions do that? Republicans argue no.

And even neutral observers, such as Federal Reserve Chairman Ben Bernanke, say lawmakers should be planning for spending cuts.

"There's only so far that we can kick the can down the road," he says. "We have to address this and the sooner we do, the less painful it'll be and the better it'll be for our economy."

Bernanke mentioned no lawmakers by name nor did he embrace any particular plans for spending cuts. But he says "It can be done. I think the question will be do we have the political capacity, the political will to do it? And I think that's what the markets will be following."

He also warned that getting out of the recession will not solve the deficit problem -- that federal spending is on an unsustainable path even in good times and will only get worse if Congress doesn't act.