Senate plan would cut deficit in half by 2014
WASHINGTON – Key Democratic leaders were performing major surgery Tuesday on President Barack Obama’s first budget plan in an effort to bring skyrocketing annual deficits under control, while preserving the option of enacting some of the president’s most significant and costly domestic priorities.
In the budget blueprints they are scheduled to formally unveil today, Democrats in the House and Senate said they plan to cut hundreds of billions of dollars from Obama’s spending request over the next five years. They also are scrapping Obama’s plan to devote more cash to the financial sector bailout. And they are restoring some of the money-saving budget gimmicks the president said he eliminated last month when he unveiled his $3.6 trillion request for the fiscal year that begins in October.
In the Senate, the result is a leaner package that would drive the annual deficit to $1.2 trillion next year, compared with $1.4 trillion under Obama’s policies. By 2014, the deficit would plummet to just over $500 billion under the Senate’s plan, requiring the nation to borrow $3.8 trillion over the next five years, compared with about $4.4 trillion under Obama’s proposal.
To meet those goals, Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, said he would leave out new spending for Obama’s proposed expansion of health care coverage, a program likely to cost in excess of $1 trillion over the next 10 years, as well as the president’s proposal to make permanent an $800 tax credit for working families.
Lawmakers would be free to adopt those policies as long as they did not increase the deficit, Conrad said. That means health care reform would have to be accompanied by tax hikes or spending cuts equal to its entire cost, not just the $634 billion down payment Obama had proposed. And the president’s tax credit, dubbed the Making Work Pay credit, would have to be scrapped unless it were paired with a money-raising initiative of equal value.
White House budget director Peter Orszag reacted favorably to the Senate blueprint, saying it would “fulfill the president’s objectives” on health care, education, clean energy and deficit reduction. Orszag acknowledged that the Making Work Pay credit may be lost, but said the administration has “two years to figure this out” before the temporary version of the credit – established in the recent economic stimulus package – expires.
In the meantime, Orszag said, Obama is launching a comprehensive review of the federal tax system that aims to simplify the tax code, unify myriad individual credits, re-examine the corporate tax structure and identify ways to collect the billions that chronically go unpaid by individual and corporate tax dodgers.