President Obama today will for the first time discuss his strategy for dealing with the nation’s $14.3 debt. It’s part of a painful negotiation with Republicans over the president’s pending request to increase the government’s borrowing limit, now less than $80 billion away.
The president needs at least $900 billion to even reach the end of the federal fiscal year on Sept. 30, likely more since deficit spending shot up 16 percent in the first six months of the fiscal year. And in order to get through the 2012 election cycle without making another politically costly request, the president would need more than $2 trillion this time.
Obama ducked the debt and deficit issue in his annual budget proposal and has preferred for Republicans and a bipartisan coalition in the Senate to take the lead on addressing the issue. But as the White House becomes more desperate for borrowing power – warning of “Armaggedon-like” consequences if the limit isn’t raised – the president has been forced to engage.
His speech today will represent a counteroffer to a Republican plan constructed by House Budget Committee Chairman Paul Ryan and due for a vote in the House this week. The speech is also part rump covering – the president is providing an answer to critics right, left and center who say it is irresponsible to ask for more borrowing power without offering some plan for taming the debt. With interest payments set to become the largest single federal expenditure in the next 15 years, folks are a bit concerned.
Since this is a forced march and because Obama is cautious by nature on policy, don’t expect big sweeping strokes today or many specifics. He will be attempting to hit a gap shot into left center field – falling short of lofty goals but flying past gritty details.
You might say that the point of the speech is so that Obama can say that he gave it.
So the primary objective today will be to avoid some of the many pitfalls in the path to fiscal responsibility. Here are the four deepest holes Obama will be trying to avoid:
“Class warfare is not going to solve this government’s addiction to deficit spending.”
-- House Republican leadership aide talking to Power Play about President Obama’s debt speech.
Two keys to the president’s debt plan are to increase taxes on high earners – household incomes of more than $250,000 – and to expose more income to Social Security taxes – currently only income up to $90,000 is taxed.
Obama has long advocated rolling back the current tax rates for high earners, a campaign promise he dealt away in the lame-duck session on the previous Congress. And increasing payroll taxes has always been the preferred answer on the left for bailing out Social Security.
And there is political advantage in calling for taxes on “the rich.” Polls generally show that while Americans prefer tax rates to remain the same, narrowly cast questions about having wealthy people pay “their fair share” or similar phrases has popular appeal.
As Obama talks about his plans, he must be careful not to allow the T-word to drip from his lips too often. A little talk about increasing taxes on those lordly rich folks makes people feel virtuous for their own sacrifices. But too much talk about “revenue enhancements” will tend to make people think Obama is going to spread their stuff around too.
This is where the president will likely talk about the broadly popular concept of a tax code simplification. The president has limited the subject tax simplification to the business world -- lower rates for businesses in exchange for the closure of loopholes – but words like “simplify” and “reduce” will still serve as nerve tonic after talk of tax increases.
Also look for Obama to favor euphemisms for tax hikes – e.g. “revenue enhancements” – wherever possible.
Whatever he calls them, though, don’t expect Republicans to cast kind eyes toward new taxes. A simplification? Sure. A rate increase for anyone? No chance.
Blowing Up the Spending Deal
"I believe voters are asking us to set our sights higher."
-- Rep. Jim Jordan, head of the 175-member House Republican Study Committee, explaining why he would vote against the compromise spending bill for the remainder of the fiscal year.
When the White House scheduled the president’s debt speech for today, the expectation in Washington was that the budget deal hammered out on Friday night would be up for a low-drama vote in the House today.
With the appetizer complete, the president was going to be turning to the entree. But Congress is still chewing on the first course.
Because congressional negotiators missed the midnight Monday deadline to put the package together, the vote can’t be held until Thursday. That means another day for liberals and conservatives alike to lambaste the deal as either draconian or insultingly small.
House Republicans say they are confident there will be enough votes to pass the measure on their side with the help of some moderate Democrats. But every vote beyond 24 that House Republicans lose from their caucus means another Democrat that must be recruited to the cuts package.
Speaker John Boehner nailed Democrats in the deal, extracting 63 percent of the cuts sought by the House, curbs to the president’s national health care law and other politically painful concessions by Democrats. Many in his caucus say Boehner did as well as possible in the deal, but still want to make a stand on spending. So Boehner needs Democratic help. But because he got the best deal possible, the pool of potential Democratic helpers is limited.
If Team Boehner can get the deal through the House the same challenges await in the Senate, with the added hazard that any one Senator could effectively shut down the government by holding the floor for a filibuster past the midnight Thursday deadline.
This all matters a great deal to Obama’s speech today.
If he sounds unserious about the debt, it will convince more Republicans that the time to stomp the brakes is now, not when the stakes are higher for the debt ceiling. It will be harder to argue that Obama has gotten the message if he comes out with a pitch for more taxes and expedited enforcement of his health care law.
If Obama sounds too hawkish, though, it will be hard to convince the liberal core of the Democratic caucuses in the House and Senate that the cuts deal wasn’t just the first step in a long march toward fiscal austerity.
This is another reason why Obama may be tempted to give a Macbeth speech today (“sound and fury signifying nothing…”). Blowing up the Friday deal would be a disaster and make his job on the debt ceiling that much harder.
“It reminds me of the joke where the guy comes home and finds his wife in bed with another guy, puts the gun to his [own] head and his wife starts laughing. He says ‘Who are you laughing at? You’re next!’”
-- Rep. Gary Ackerman, D-N.Y., talking to the Huffington Post about Republican threats to refuse the president’s request to increase the debt ceiling.
Democrats believe that Republicans might be serious about shutting down the government over the president’s debt-ceiling request, but aren’t so sure that this would be entirely bad.
The rank and file in the president’s party agrees with the White House assessment that the failure to lift the borrowing cap would have “Armageddon-like” consequences for the economy. But they also tend to think that House Republicans would suffer hugely for doing so.
After seeing what Republicans got on the smaller issue of funding the government for 25 weeks with the shutdown threat, Democrats are worried what Obama will do in order to prevent a debt ceiling impasse. After all, the president would not likely fare so well in an “Armageddon-like” electoral atmosphere either.
Liberals are already eyeing the president’s interest in entitlement reform suspiciously. Republican plans on entitlements are Democrats’ best weapon to retake seats in Congress after the disastrous 2010 midterms. If Obama today shows a willingness to talk about structural changes to Medicare and Medicaid instead of just surface alterations to billing procedures, there could be a revolt on his left.
The president’s base will take a great deal in the name of unity ahead of 2012, but entitlement reform is not one of them.
Leaning too Hard on the Gang of Six
“It’s a mixed blessing. We’re glad he’s taking some kind of position, but it’s definitely adding to the pressure. It’s not terribly helpful.”
-- A senior Senate aide close to the “Gang of Six” debt negotiators talking to FOX News about added pressure from the president on the subject.
President Obama would no doubt prefer to have the Senate members of his bipartisan debt and deficit commission handle the issue of entitlement reform and tax structure.
It’s got everything Obama likes in a policy solution: committee meetings, diffuse blame and multilateralism.
But the bipartisan group of Senators who are working up a legislative version of the Bowles-Simpson Debt Commission’s recommendation say they won’t have a bill to present until after the upcoming Easter recess.
That means there won’t be anything to start debating until the first week of May, about the same time that the administration expects the debt ceiling to be reached.
As gang member Tom Coburn said Tuesday: “We’re not anywhere close to having an agreement.”
The message from the gang: Don’t count on us to bail you out. But the president badly needs them to come up with a solution that stands somewhere between Ryan’s big pitch and his own small ball to be offered today.
If Obama makes their solution a condition of his opening offer, though, it may spook Republicans out of the gang and generally decrease the chance that any deal will be reached.
As much as the president would like Congress to take the lead here, he’s going to have to show some cards.
And Now, A Word From Charles
“[President] Obama himself said in televised address a month ago -- non-negotiable – that the leaving of Misrata alone [was one of the terms of U.S. engagement]. Today Misrata is getting shelled mercilessly. And this is non-negotiable. If you are the world's leading power and if you want to will the end, you have to will the means. Otherwise you are Liechtenstein. It also wants to see the world live in peace and harmony, but nobody expect it to do anything.”