Government & Politics

Bowing to seniors, liberals, Obama ditches bitter deficit medicine

In a bow to politics both in Washington and in midterm elections, President Barack Obama will propose a new budget that would increase spending on popular programs and drop a plan to slow the growth of Social Security benefits that had angered his party’s base.

Obama’s budget, to be unveiled on March 4, will urge $56 billion in new spending split between the Pentagon and domestic initiatives such as early childhood education, jobs training and help for manufacturing that are popular to Democratic voters. All would be financed by tax increases or other offsets, making them unlikely to pass Congress but still a ready tool for Democratic candidates to use in congressional elections this fall.

At the same time, Obama will drop from his budget a year-old proposal to trim benefit increases for Social Security recipients and veterans. The offer always was paired with a demand that the wealthy pay higher taxes, but Republicans never agreed to that. Obama was left with no deal with the right, and a left flank angered that he even offered to curb entitlement growth. Instead, the left cheered Thursday and predicted an energized party base heading into the elections.

“This is a huge progressive victory and greatly increases Democratic chances of taking back the House and keeping the Senate,” said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, a liberal policy group. “Now, the White House should join (Massachusetts Democratic Sen.) Elizabeth Warren and others in pushing to expand Social Security benefits to keep up with the rising cost of living.”

Republicans criticized both ideas.

“We hope the president submits a budget with real solutions, instead of more spending, higher taxes and dangerous levels of debt,” said Kevin Seifert, a spokesman for House Budget Committee Chairman Paul Ryan, R-Wis.

“This reaffirms what has become all too apparent: The president has no interest in doing anything, even modest, to address our looming debt crisis,” said Brendan Buck, spokesman for House Speaker John Boehner, R-Ohio. “With three years left in office, it seems the president is already throwing in the towel.”

White House aides unveiled the broad brushstrokes of the budget weeks ahead of the formal proposal.

On spending, spokesman Josh Earnest said Obama would urge the new spending as part of an “opportunity growth and security initiative.”

It would include money for manufacturing institutes, preschool education and a contest among states to spur energy efficiency, according to two senior administration officials familiar with the proposal but not authorized to speak publicly as a matter of White House practice.

The president will recommend paying for the proposals by closing tax loopholes and “spending reforms,” but the officials declined to outline any specific recommendations except to confirm that Obama will once again suggest raising the cigarette tax to finance preschool programs.

In a change of negotiating style, Obama will return to a “traditional way of budgeting” when he unveils a spending plan that solely reflect his priorities, one of the administration officials said. He will abandon the approach of publicly offering the curbs in growth of entitlement benefits as part of a package, only to end up with no deal.

On the entitlement spending, the White House said it would remain willing to discuss it but only if Republicans first signaled their willingness to consider tax increases on the wealthy – a move that would anger the GOP base as much as Obama’s did to his base.

“The president was willing to step forward and put on the table a concrete proposal,” Earnest said. “Unfortunately, Republicans refused to even consider the possibility of raising some revenue by closing some loopholes that benefit only the wealthy and the well connected.”

The White House also suggested that a dropping deficit eases the pressure for dramatic reductions in entitlement spending. At the end of 10 years, Earnest said, the deficit will drop to 2 percent of the overall economy, according to White House forecasts that will be included in the budget proposal.

“There’s more that we can do,” Earnest said. “But . . . the deficit in this country has been declining at the fastest rate since the end of World War II.”

In its recent 10-year budget outlook, the nonpartisan Congressional Budget Office anticipated deficits doubling to more than $1 trillion within a decade if current law remains the same.

In an effort to save $230 billion over 10 years, Obama had proposed adopting a new way of calculating benefit increases that assumes consumers don’t always pay higher prices for products but rather substitute with cheaper alternatives. The net result is a lower inflation rate than measured by the conventional consumer price index.

Thursday’s announcement came as Democrats fight to hold seats in the congressional elections at a time the president and the new health care law could be a drag. Immediately, one party leader used it to appeal to seniors, whose steady votes are much sought in low turnout midterm elections.

“I commend President Obama for his commitment to keeping Social Security strong, and for rejecting Republican calls to cut badly needed cost-of-living increases,” said Senate Majority Leader Harry Reid, D-Nev.

Obama did not drop the proposals because Democrats asked him to, according to one of the senior administration officials, but White House officials did hear from enthusiastic lawmakers Thursday after informing them it would be eliminated from the budget.

Richard Fiesta, head of the group Alliance for Retired Americans, added, “Our voices were heard. Nationwide, grassroots actions and people-powered politics worked. We applaud the president for doing the right thing: listening and keeping this unjust cut out of his budget proposal.”

Other groups doubted the president’s word.

“While it appears the White House has, for now, listened to the vast majority of Americans, of all ages and political parties, the president has still left the door open for more ‘let’s make a deal’ bargaining with seniors’ benefits,” said Max Richtman, head of the National Committee to Preserve Social Security and Medicare, a group that had organized pickets in front of the White House last year.

Steven Thomma, Lesley Clark and David Lightman of the Washington Bureau contributed.