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 President Obama pressured Republicans on Wednesday to accept higher taxes as part of any plan to pare down the federal deficit, bluntly telling lawmakers that they “need to do their job” and strike a deal before the United States risks defaulting on its debt.

Declaring that an agreement is not possible without painful steps on both sides, Mr. Obama said that his party had already accepted the need for substantial spending cuts in programs it had long championed, and that Republicans must agree to end tax breaks for oil and gas companies, hedge funds and other corporate interests.

In a 67-minute news conference, Mr. Obama cast the budget battle as a tug of war between the interests of the rich — like owners of corporate jets, who he said get generous tax breaks — and those of the middle class, the elderly and children.

Directly challenging Republican leaders, Mr. Obama said, “Everybody else has been willing to move off their maximalist position — they need to do the same.”

At the same time, Mr. Obama, under assault from Republicans on the campaign trail for an unemployment rate that remains above 9 percent, asked voters to understand that the economic recovery would take time but said that Washington, even in its current financial straits, could still do more to help. He expressed support for extending a reduction in payroll taxes for an extra year, providing loans for road and bridge-building and approving trade pacts that could help spur exports.

While the president expressed hope for a budget deal before the government’s borrowing authority expires in early August, he scolded Republican lawmakers for putting off hard decisions until the 11th hour, saying that his daughters did not procrastinate that way with their schoolwork.

“Malia and Sasha generally finish their homework a day ahead of time,” the president said, in a tone of rising exasperation. “They don’t wait until the night before. They’re not pulling all-nighters.”

The House speaker, John A. Boehner, flatly rejected Mr. Obama’s call for new tax revenues, saying the “president’s remarks ignore legislative and economic reality.”

In a toughly worded statement, Mr. Boehner said the House would vote to raise the debt limit, as the White House has demanded, only if the administration agreed to a deal that contained deep spending cuts and no tax increases.

“The American people know tax hikes destroy jobs,” Mr. Boehner said. “They also know Washington has been on a spending binge for many years, and they will only tolerate a debt-limit increase if we stop it.”

Mr. Obama’s news conference, his first extended exchange with reporters since March, also touched on Libya, on which he offered a brisk defense of his decision not to seek Congressional authorization for the NATO-led air campaign, and on same-sex marriage, which he stopped just short of endorsing as a legal right.

But the president’s combative remarks on the budget commanded most of the attention, signaling that he had fully entered the fray. On Monday, he took over stalled talks led by Vice President Joseph R. Biden Jr., meeting with Senate Republicans and Democrats, and on Wednesday he met with the Democrats.

So far, the president’s involvement seems mainly to have dramatized the gulf between the White House and the Republicans on fiscal priorities.

By all accounts, the round of negotiations steered by Mr. Biden made significant progress in identifying spending cuts and revenue-generating items. But with the Aug. 2 deadline looming for the expiration of the government’s borrowing authority, the partisan maneuvering on both sides has increased.

Senate Republicans have talked about a short-term increase in the debt ceiling, betting that the White House will accept spending cuts, with no tax increases, rather than face two votes on the issue before the 2012 election. Mr. Obama is taking aim at tax policies that benefit the rich as a way to pressure Republicans. Asserting that chief executives and hedge fund managers are paying the lowest tax rates since the 1950s, before he was born, the president, casting the issue in populist terms that some conservatives said veered into class warfare, said they could afford to pay more.

“You’ll still be able to ride on your corporate jet,” Mr. Obama said. “You’ll just have to pay a little more.”

Under Democratic proposals, owners of corporate jets would have to write off the aircrafts’ cost in more years, which would generate an estimated $3 billion for the Treasury over a decade. Hedge funds and private equity investors would pay higher capital gains tax on their earnings. Phasing out tax deductions and credits for oil and gas companies could raise nearly $40 billion, economists said.

Even if all these changes to the tax code were accepted, they would still amount to only a sliver of the $4 trillion in savings that Mr. Obama has said he wants to achieve. But refusing to increase revenues, he asserted, would necessitate cuts in programs that award college scholarships, finance the National Weather Service and medical research, and improve food safety.

“I’ve said to some of the Republican leaders: you go talk to your constituents, the Republican constituents, and ask them, are they willing to compromise their kids’ safety so that some corporate-jet owner continues to get a tax break?” Mr. Obama said. “I’m pretty sure what the answer would be.”

Citing the hours of meetings he and Mr. Biden had held with leaders from both parties, Mr. Obama seemed particularly piqued by Republican criticism that he had failed to show leadership. Noting that the House is in recess this week, and the Senate is scheduled to be gone next week, he said he had been hunkered down in the White House, “doing Afghanistan and Bin Laden and Greek crisis.” If Congress was serious about a deal, he said, it should cancel its breaks.

There were signs on Capitol Hill that his words had struck a nerve. Nine Republican senators announced that they would object to a recess during the Fourth of July week. Late Wednesday it appeared that Democratic leaders would go along and keep the Senate in session next week.

Wary of spooking financial markets, Mr. Obama stopped short of saying that Aug. 2 was a drop-dead date for a deal. But he dismissed those who argue that the government can ignore the debt limit by paying some bills and not others.

“This is the equivalent of me saying, ‘You know what, I will choose to pay my mortgage, but I’m not going to pay my car note,’ ” Mr. Obama said. “Or, ‘I’m going to pay my car note, but not my student loan.’ ”

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Source:  The New York Times

 President Obama plans to announce a two-year pay freeze for civilian federal workers later Monday morning, according to an administration official, the latest White House move intended to demonstrate concern over sky-high deficit spending.

The president’s proposal will effectively wipe out plans for a 1.4 percent across-the-board raise for 2.1 million civilian federal government employees in 2011 and 2012. The military would not be affected. The president has frozen the salaries of his own top White House staff members since taking office 22 months ago.

While a pay freeze will make only a small dent in the federal deficit, it represents a symbolic gesture toward public anger over unemployment, the anemic economic recovery and rising national debt. By announcing it on Monday, the president effectively will preempt Republicans who have been talking about making such a move once they take over the House and assume more seats in the Senate in January.

The number of federal workers making more than $150,000 a year has grown ten-fold in the past five years and doubled since Mr. Obama took office, USA Today reported earlier this month. Since 2000, federal pay and benefits have increased 3 percent annually above inflation, compared with 0.8 percent for private sector workers, according to data cited by the newspaper.

Source:  The New York Times

President Barack Obama’s budget commission is holding its final meeting until after the midterm elections, when it hopes to produce a plan to wrestle the federal deficit under control.

The commission and its chairman, Erskine Bowles, have kept a low profile so far in order to keep their work out of the bitterly fought midterms. But when it reconvenes in November, the panel’s work will intensify as it considers options for cutting the deficit by more than half by 2015.

It’ll take 14 of the panel’s 18 members to come up with a plan for a possible congressional vote in December. That’s a tough task given the time crunch and wide ideological divisions among the members.
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Source: The Washington Post

The director of the nonpartisan Congressional Budget Office said on Thursday that permanently extending tax cuts put in place under President George W. Bush would provide a “considerable” economic boost over the next several years but would result in substantial increases in the federal deficit, placing the country in a precarious fiscal situation by 2020.

In offering this assessment, Douglas Elmendorf underscored the difficult choice facing lawmakers as they debate whether to extend any or all of the tax breaks, which are scheduled to expire at the end of the year.

The CBO’s analysis was part of a broader report released Thursday in which the agency projected that the federal government’s budget deficit for this year would be $1.34 trillion. The figure is slightly below last year’s total, but the CBO warned that policymakers face “daunting” challenges in the years ahead in trying to return the country to fiscal sustainability.

Concerns about the federal deficit have been figuring prominently in congressional debates over whether to spend more money on programs to stimulate the economy and to help the unemployed, as well as over the Bush-era tax cuts.

The CBO examined the impact if most of those cuts are extended. This scenario assumed that the breaks for higher-income taxpayers would expire.

“Under that . . . scenario, economic growth would be stronger next year; unemployment would be lower next year,” Elmendorf said. But he added that “over time, that extra borrowing — and it’s a good deal of extra borrowing — would have negative consequences on the economy.”

Republicans and many representatives of business have pushed for a permanent extension of all the tax cuts, arguing this would jump-start economic growth. They warn that allowing taxes to rise could stifle the recovery.

The Obama administration and Democratic leaders in Congress are seeking to extend tax cuts for Americans earning less than $250,000 a year, while letting expire some of those for wealthier individuals. Democrats say this would help stimulate the economy and cost the government less than if all cuts were extended.

The CBO’s baseline scenario assumes that the Bush-era tax breaks will expire, as current law provides. In that case, next year’s deficit would fall to $1.07 trillion, or 7 percent of the country’s total economic output, or gross domestic product, according to agency estimates. By 2012, the deficit would shrink to $665 billion, or 4.2 percent of GDP.

Agency analysts also projected that public debt would rise from 53 percent of GDP last year to almost 70 percent of GDP by 2020, a figure unmatched since the 1950s.

“It is an extraordinarily high level of debt by the experience of this country over the past 65 years,” Elmendorf said. “Of course, it is also an extraordinarily difficult economic situation in which we find ourselves.”

President Obama created a bipartisan commission this year to address the nation’s soaring debt. Members are considering a wide range of measures, from cuts in Medicare and Social Security to reform of the tax system. Obama has asked the group to make recommendations by Dec. 1.

On a positive note, the CBO lowered by $50 billion the estimated cost of the government’s bank bailout program, known as the Troubled Assets Relief Program. The CBO said the change was in part due to improved market conditions and a provision in the recently approved financial overhaul bill that reduced the program’s spending authority.
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Source: The Washngton Post

President Obama signed a landmark health-care bill into law Tuesday, enacting a sweeping overhaul of the nation’s $2.5 trillion health system after a year-long effort that he said shows the United States “faces its challenges and accepts its responsibilities.”

“The bill I am signing will set in motion reforms that generations of Americans have fought for and marched for and hungered to see,” Obama said before putting his signature on the legislation. While he said it would take four years to fully implement some of the law’s provisions, he highlighted measures that take effect this year.

In a ceremony in the East Room of the White House, Obama signed the massive bill after addressing a congratulatory audience that included lawmakers who supported the measure. No Republicans voted for the bill in the House or Senate, and Democrats who opposed it were not invited, White House officials said. They said those Democrats would not have wanted to attend anyway.

Before Obama spoke, Vice President Biden offered effusive praise for the president in an introduction that hailed him as a historic leader for pushing his signature domestic initiative despite long odds.

“Mr. President, you’re the guy that made it happen,” Biden told Obama to applause from the gathering. As Obama stepped to the lectern, Biden embraced him and was captured on the microphone telling him, “This is a big [expletive] deal.”

Obama told the audience, “Today I am signing this reform bill into law on behalf of my mother, who argued with insurance companies even as she battled cancer in her final days.” He also dedicated the bill to a list of other Americans who have contacted him about their health-care problems, some of whom were in attendance.

He said it has been easy at times to succumb to cynicism and to doubt America’s ability to overhaul its health-care system.

“But today we are affirming that essential truth . . . that we are not a nation that scales back its aspirations, that we are not a nation that falls prey to doubt or mistrust,” Obama said. “We are a nation that faces its challenges and accepts its responsibilities.”

He concluded: “Here in this country we shape our own destiny. . . . That is what makes us the United States of America. And we have now enshrined the core principle that everyone should have some basic security when it comes to their health care.”

Before he signed the overhaul of the health-care system, a Republican attempt to torpedo the final piece of the package failed.

After meeting Monday with representatives of both parties, the Senate parliamentarian, Alan Frumin, determined that the final element of the health package could advance under fast-track budget rules, known as reconciliation, that protect it from a Republican filibuster.

The Senate is slated to begin debate on the reconciliation bill Tuesday afternoon.

Together, the two pieces of legislation would cost $940 billion over the next decade and extend health-insurance coverage to an estimated 32 million Americans who are currently uninsured. The package is aimed at stemming the soaring growth in the cost of health-care and reducing the federal deficit by more than $1.3 trillion over the next 20 years.

Referring to the reconciliation bill, Obama said the Senate “still has a last round of improvements to make” to the legislation, and he expressed confidence that the Senate would make them “swiftly.” The remark drew cheers from the House members in the audience, who narrowly passed the Senate bill and the House fixes Sunday night in separate votes.

Obama said the legislation was a testament to “the historic leadership and uncommon courage” of the lawmakers, “who have taken their lumps during this historic debate.” That elicited more cheers, as well as laughter when one legislator interjected, “Yes, we did.”

After the signing ceremony, Obama headed to the Interior Department for a longer speech to a larger audience including interest groups and others who could not fit into the East Room event.

“You met fear with a force that is a lot more powerful; that is, faith in America,” Obama told the group. “So this victory is not mine. It’s your victory. It’s a victory for the United States of America.”

Addressing opponents who he said are still “fighting change” and “still making a lot of noise about what this reform means,” Obama sought to dispel what he described as “misinformation” about the legislation. He told senior citizens, “These reforms will not cut your guaranteed benefits.” And he said a health insurance exchange scheduled to be established in 2014 was “originally a Republican idea.”

Obama said, “I’m confident that you will like what you see: a common-sense approach that maintains the private health system but makes it work for everybody.”

While many challenges to the nation remain, “we can take these next steps with new confidence, with a new wind at our backs,” he said. “Because we know it’s still possible to do big things in America. Because we know it’s still possible to rise above the skepticism, to rise above the cynicism, to rise above the fear.”

Bringing the audience to its feet, Obama continued: “There will be difficult days ahead. . . . But let us always remember the lesson of this day and the lesson of history: that we as a people do not shrink from a challenge; we overcome it. We don’t shrink from our responsibilities; we embrace them. We don’t fear the future; we shape the future. . . . That’s who we are.”

White House advisers have made clear that Obama is more gratified by the passage of the landmark health-care legislation than by actually winning the presidency.

Now a president who has been criticized for being long on ambition and short on accomplishment has achieved something that eluded predecessors as far back as Theodore Roosevelt, who called for health-care reform a century ago.

But, history aside, what does it mean for Obama and his party this November?

The question annoys White House officials, even as they prepare to showcase the legislation’s most immediate effects and its historic significance during events such as a trip to Iowa later this week.

“I assume the president will talk about health care for a long time,” White House Press Secretary Robert Gibbs told reporters Monday. “I have no doubt that we’ll be on the road extensively in the fall as it relates to health-care reform and as it relates to helping those that supported health care last night and supporting Democrats, even some that didn’t.”

White House officials have said since Obama took office that, if the president achieved his agenda, political success would naturally follow. But Obama is going to have to help it along, as it turns out, given the splits that have opened up within his own party during the long fight for health-care reform.

With some success, Republicans have called the legislation a “government takeover” of one-sixth of the economy, even though, to the left’s chagrin, it does not include a government-run insurance option. Obama’s East Room signing ceremony marked a renewed effort to counter the Republican argument.

It included Americans who will benefit from the legislation’s most immediate impact, some of them characters who have appeared in his speeches over the past year.

Some of those benefits that kick in this year include a provision barring insurance companies from excluding children with preexisting conditions and another that allows children to remain on their parents’ health-insurance policy until the children are 26 years old.

A few of the less popular provisions will be phased in over several years, including the requirement that all Americans buy health insurance. Some states prepared legal challenges to that element of the legislation. Gibbs said he expects those suits to fail in court.

Minutes after Obama signed the bill, attorneys general from at least 13 states sued the federal government, alleging that the new law is unconstitutional.

In Virginia, a Democratic state lawmaker launched a campaign Tuesday to try to stop Attorney General Ken Cuccinelli II from challenging the health-care legislation in a separate lawsuit. Cuccinelli, a conservative Republican, fulfilled his pledge to file suit “as soon as the ink is dry” on Obama’s signature. Del. David Englin called the effort “an egregious waste” of Virginians’ taxpayer dollars.

In the latest political wrangling, Republicans, led by Sen. Judd Gregg (R-N.H.), had argued that the reconciliation bill being taken up by the Senate should be stripped of fast-track protection — a move that would essentially kill it — because provisions related to a new tax on high-cost health insurance policies would impermissibly impact the Social Security trust fund. Reconciliation bills are prohibited from making “recommendations” that impact the trust fund.

For days, Senate Democrats have said they were confident they could beat back the parliamentary challenge, the first of many expected this week as the Senate drives toward final passage by Friday. Although the new tax on high-cost insurance policies might affect the sums collected through the Social Security payroll tax, that effect is indirect, they said, noting that nothing in the measure would explicitly impact Social Security. Democrats also noted that numerous reconciliation bills have successfully included policies with a tangential effect on Social Security, including the 2001 tax cuts sought by then-President George W. Bush.

Late Monday, Frumin sent an e-mail to budget aides from both parties, confirming that the challenge “is not well taken,” according to a copy of the missive obtained by The Washington Post.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) was cheered by the news: “We believe the parliamentarian is clearly correct based on the precedents,” he said in a statement. Republicans did not immediately respond to requests for comment.

The ruling laid to rest a dispute that had been brewing since last week, when Gregg first announced his intent to raise the challenge while the House was still in the final throes of approving the two-part health package.

The House on Sunday approved the health bill passed by the Senate on Christmas Eve — a tough vote for many House Democrats who disliked the Senate bill — then passed a package of revisions to remove the most objectionable provisions. Obama opted to sign the main health-care bill into law before the Senate took up the package of revisions.
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Source: The Washington Post

Blueprint will include war, other expenses previously kept off the books

WASHINGTON—Following eight years of budget practices that often camouflaged the full extent of federal spending, President Barack Obama is planning a new strategy of putting as many of the expected costs on the books as possible, senior White House officials say, in order to make clear the full extent of the challenges facing the country.

Obama’s first budget, scheduled to be released in broad outline Thursday, will include money for the Iraq War, the buildup in Afghanistan, economic aid and other expenditures at the outset, instead of tucking such costly commitments into separate spending requests that would go to Congress later—a device former President George W. Bush used often.

“The president is determined to treat the American people as adults and be straight-up about what we’re facing and what we need to do to move forward,” said David Axelrod, senior adviser to the president. “He’s completely confident we can do that, but only if we face up to our challenges. You can’t finesse the situation we’re in.”

The new approach, which is likely to be set out in the president’s address to Congress on Tuesday night as well as in Thursday’s budget, follows Obama’s repeated campaign pledges to make government more transparent. But it also fits with his immediate political need—to persuade Congress and the public to accept costly and controversial measures to rescue the economy, reform health care and reshape energy and environmental policies.

Paradoxically, Obama’s strategy of piling costs into the budget could also make it easier for him to keep his promise to cut the federal deficit in half by the end of his first term. The economic crisis is driving the deficit so high right now that, even if it were cut in half by 2012, the overall budget and the amount of red ink still could be huge by historical standards.

In other words: Loading in stimulus spending, war appropriations and other special costs will raise the deficit immediately. But barring unforeseen circumstances, those costs are likely to be gone or at least sharply reduced by the end of Obama’s present term. And because he has pledged to cut the annual deficit—not the entire national debt—in half, starting with huge deficits now, that means he can slash spending in his fourth year relative to 2009 and still afford major programs.

At a time when polls suggest a limited tolerance from taxpayers for more government spending, the president is working hard to offer reassurance that he will be more responsible than the last administration—with an emphasis on the fact that the calamity already was well under way when he walked into the Oval Office.

“One of the first requisites for recovery is recognition,” Axelrod said. “I don’t mean to sound like an Alcoholics Anonymous meeting. But that’s true in budgeting as well as life.”

For years, the White House and Congress have engaged in a kind of Kabuki theater around the federal deficit. In February, the president would release a budget for the forthcoming fiscal year that would show declining deficits into the future. But that budget would exclude most war costs and use several unrealistic assumptions, including overoptimistic predictions of economic growth and rising federal revenues. Budget writers also tended to assume the country would experience no significant natural disasters.

“When the budget came out, there were significant costs that were excluded from the budget because the Bush administration pretended that certain policies that everyone knew would continue wouldn’t continue,” said Jim Horney, a budget expert with the Center for Budget and Policy Priorities.

Every year the Bush administration would issue an initial deficit projection that was much higher than other economists’ projections. That way, when the final deficit count was released, the administration could claim it had brought the deficit “down.”

In fact, deficits accumulated each year that Bush was in office, from $158 billion in fiscal 2002 to $455 billion last year—totaling roughly $2.1 trillion all together.

The legacy of Bush’s deficits leaves Obama in a difficult position: He has to make deficits worse in the short term while signaling that he means what he said in the campaign about long-term deficit reduction.

As he opened a fiscal summit with lawmakers and budget experts Monday, the president emphasized the role that health-care costs are playing in the deficit, calling it the “single most pressing long-term fiscal challenge we are facing, by far.”

By 2018, more than 51 percent of all health-care spending in America will be done by federal, state and local government, totaling about $2.2 trillion, according to the latest estimates released Tuesday by the Centers for Medicare and Medicaid Services. In 2008, government accounted for an estimated 46.6 percent of the nation’s health-care spending, with the majority provided by consumers and private insurance companies.

For some lawmakers, the way to contain health costs has nothing to do with Obama’s idea of reform.

“Looking ahead, we’re hearing from some people that we can’t reform government entitlement programs until we reform the entire health-care system,” said Sen. Chuck Grassley of Iowa, ranking Republican on the Senate Finance Committee. “The problems with our health-care system need fixing. But for a lot of people, health-care reform is code for spending more, not less.”

Source: The Chicago Tribune