Obama's budget balancing act
President Barack Obama speaks on fiscal policy April 13, 2011 at George Washington University in Washington, DC.
April 14th, 2011
02:42 PM ET

Obama's budget balancing act

Editor's Note: James Lindsay is a senior vice president of the Council on Foreign Relations, and this is his first take in response to Obama's Wednesday budget speech.

By James Lindsay from the Council on Foreign Relations

President Barack Obama's speech today at George Washington University put his marker down in the debate on what the United States needs to do to put its fiscal house in order. His plan has no chance of passing as is, and the president said as much. But it does mean that the long-awaited "adult conversation" about government red ink has begun.

Obama's deficit reduction plan is less ambitious than the one that House Budget Committee Chairman Paul Ryan (R-WI) floated earlier this month. The president would slash federal borrowing by $4 trillion over the next twelve years, which is well below the target not just in the Ryan plan but also in the Bowles-Simpson Deficit Commission recommendations.

Obama's plan will draw criticism from all quarters. Republicans adamantly oppose his call for higher taxes. Deficit hawks will argue that tax increases for the wealthy will not be enough and that higher interest rates would wipe out much of Obama's projected savings. Democrats will argue that the budget cuts go too far.

But it is a mistake to read Obama's speech solely as a budget document. Its purpose was primarily political. It kicked off the 2012 presidential campaign by contrasting the competing visions Republicans and Democrats have for America's fiscal challenge. It painted Republicans as reckless and radical in using deficit reduction as a means of "changing the basic social compact in America."

In comparison, Obama's "more balanced approach" envisions that "we live within our means while still investing in our future." This approach recognizes that a desire to cut budgets shouldn't obscure the importance of preserving some types of federal spending. An America that refuses to invest in its future will be a country that is less able to hold its own in an increasingly competitive global economy, argues Obama, citing specifically the spending on energy alternatives and education by other industrialized states such as China, Brazil, and South Korea.

More immediately, though, Obama's speech tried to frame the debate for the impending vote on the national debt ceiling. The U.S. government will hit the debt limit in mid-May, after which time it will be barred by law from borrowing any more money. The White House has abandoned its original hope that Congress will pass a clean bill. House Republicans have made clear that they will not vote for any bill that is not linked to what they see as a credible plan to cut federal spending.

The struggle now is over whose deficit reduction vision wins. Speaker of the House John Boehner (R-OH) reiterated today the Republican position that "raising taxes will not be part of" any debt ceiling deal. Obama just as firmly insisted that he will oppose radical changes in Medicare or further extension of the Bush tax cuts.

Both sides will jockey for political advantage over the next several weeks. Neither side will tip its hand on its willingness to compromise on key principles until the last moment, if at all.

The stakes in the debate are high. Default on U.S. debt obligations would cause unimaginable economic harm and derail not just the U.S. economic recovery but global growth more generally. Even the prospect that Washington might not be able to find common ground could roil the markets and have much the same effect.

The opinions expressed in this article are solely those of James Lindsay.  

Topics: Economy • Perspectives • Politics • United States

soundoff (12 Responses)
  1. Monica

    What do you think of this video of Representative Paul Ryan discussing his medicare voucher reform proposal, the White House's lack of bipartisanship efforts, the debt commission report and today's House vote on tax cuts,etc (12/10): http://f4a.tv/gSo1b3

    April 14, 2011 at 2:57 pm | Reply
  2. Mark Montgomery

    The republicans are cheap, stingy, heartless creatures who will not be happy until Social Security, Medicare and Medicaid are destroyed. The republicans want to destroy the middle class and they have begun that war all over the USA by attacking teachers, police and labor unions. Union workers are our middle class and the republicans can't stand seeing anyone but themselves living well. We are at war with the republicans and they are the enemy. We have to do anything it takes to stop them. Luckily nothing has to be done for Bush's reduced tax rates on the wealthy to expire next year. The republicans should be paying through the nose. President Obama is standing by with his veto in case anything goes wrong. Mark Montgomery NYC, NY boboberg@nyc.rr.com

    April 14, 2011 at 3:15 pm | Reply
  3. george Adams

    To the president,
    Please look into or fund trials on a FDA approved drug naltrexone, which has been found to to so effective in treating or curing 40 Cancers and disorders including MS at a low dose which it was never intended. Just PASSED weeks ago by the FDA in a trial for Chrones disease, it is 90% effective! The lack of making money on this has held this up for many years but the lives saved for so called hopeless cancers are mounting every day! I lost my wonderful wife because my doctor would rather make one million dollars on Chemo which doesn't work than let me see a DR burt Berkson use a drug that cost a buck a day which over 60% of the worst CANCER patients DO NOT DIE.
    Please address this, do somethiong about the trial which are so slow to come because everything now is so money driven!
    the website is NON- PROFIT and you tube videos are doctors and patients telling their success stories.
    Google
    Lowdosenaltrexone
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    Best Regards,

    George adams

    April 14, 2011 at 3:19 pm | Reply
  4. j. von hettlingen

    Obama is not at all in an enviable situation. Think how different it would have been for him in the 1990's. Wonder if Bill Clinton would have done a better job to-day. The qualities of being a good president are essential. At the end of the day, it's the circumstances, that create heroes, yet history will tell, if one has been a good president or not.

    April 14, 2011 at 5:41 pm | Reply
    • j. von hettlingen

      Correction: Think how different it would be for him, if we were in the 1990's. Wonder if Bill Clinton would do a better job to-day.

      April 15, 2011 at 3:01 am | Reply
  5. JP

    It would be great for my family if I went out and bought a large house on lots of property for my family. It would also be nice if I could send my child to the best prep school in the nation. The problem is that I don't have the money to do it. I'm not saying that my family would not be better off for it, but that I cannot afford it. The same is true with the federal government. A lot would be nice to have but not essential. Its pretty simple, if you can't pay for it you shouldn't have it. Where did our populous develop this sense of entitlement from?

    April 14, 2011 at 6:05 pm | Reply
  6. james2

    Obama has a chance to call the Republicans' bluff here because their biggest campaign donors are guys on Wall Street and the Chamber of Commerce. If there is anybody who does not want the debt ceiling not to be raised it is those two groups.

    April 14, 2011 at 7:40 pm | Reply
  7. jd

    I really don't understand either party's position on the budget. The republicans insist on tax cuts while slashing entitlement programs. The democrats on the other hand, seem to believe punitive taxation of the wealthy while expanding the size and scope of the federal government is the answer. It's all ideology and nonsense. And despite repeated promises of cooperation, our leaders continue to pursue the same polarized positions and brinkmanship. Whether your republican or democrat, you have to agree that the super-heated rhetoric spewed by both sides isn't helping. Shouldn't we demand better from our leaders

    April 14, 2011 at 10:54 pm | Reply
  8. Madeline White

    Not acknowledging that Obama's Budget Speech was a politcal, partisan speech instead of the vision you attributed to it perpetuates the main reason Washington remains detached from our government's needed reforms.
    Instead of sighting the needs of the groups of his political strengths he should join Congressman Paul Ryan and other Congressmen and Senators who are the truly willing to do so. The tax system needs the overhaul the Bowles and Simpson committee listed. After those recommends are passed; then will be the time to consider Tax Rates. The reporter Carol's exasperation with the class warfare that has dominate far, far too long national politics is shared by many. Too many citizens pay no income taxes and have no 'skin' in the game. Some pay payroll taxes, but they are now a economic sham and have been for a long time. The recently passed heath care legislation ads too that demographic economic problem. Enough of President Obama's personal visions...I still wonder why he felt compelled to lecture the mid-east about what to do with their own countries. The dabbling in Libya now is cruel false promising. The U.S. did the same thing to Hungry during the Cold War. I'm in end of my 7th decade and feel we as a country have become too all about me and groupie in our National perspectives.

    April 15, 2011 at 11:34 am | Reply
  9. GOPisGreedOverPeople

    GOP solution to all: Turn the Old, Sick, and Poor into Soylent Green to feed the Military. It's a self sustaining system.

    April 15, 2011 at 9:20 pm | Reply
    • Onesmallvoice

      Thank you,GOPisGreedOverPeople. that was well said.

      April 15, 2011 at 10:10 pm | Reply

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