Obama rebuffs GOP calls for immediate deep spending cuts

By Tim Fernholz

January 25, 2011

While President Obama is known for campaigning on change, his State of the Union Address offered much of the same rhetoric on fiscal responsibility he has deployed in the past two years. Rather than meeting Republicans half-way on spending after his party's electoral set-back this fall, he asked them to join him in reforming the corporate tax code.

Though Obama called debt reduction a "critical step" in "winning the future," his first public response to House Republicans hell-bent on cutting spending suggested he would fight for his priorities.

It was no surprise that the president called for a spending freeze that was much more limited than the deep immediate cuts Republicans are demanding.

But it was striking that he did not call forcefully for efforts to reach agreement on a credible long-term deficit-reduction plan that would begin after the economic recovery is less fragile.

The president challenged Republicans to expand their focus beyond simply slashing spending and to "make sure what we're cutting is really excess weight" - a veiled reference to Democratic plans to push back against Republicans, who voted today on generalized budget cuts, when they begin to identify specific programs they intend to slash.

The president's proposal for a five-year budget freeze of non-security discretionary spending, which would save $400 billion over 10 years, represents a real reduction in domestic spending over time, but experts don't expect it to survive first contact with a Republican Congress that is demanding some $60 billion or more in immediate cuts. Obama offered a similar spending freeze last year.

But Obama undermined his proposed spending freeze by excluding security spending, entitlements, education and infrastructure and calling for more "investment" in key sectors. While he is ready to find reductions, he is clearly rejecting the idea of limited government.

Instead, Obama asked Republicans, Democrats and the business community to work together on deficit neutral corporate tax reform that eliminates tax expenditures and lowers rates, a project first reported in the National Journal Monday.

While he also offered a willingness to tackle the big long-term fiscal threats, from soaring entitlement costs to the growth of revenue-draining "tax expenditures," the president did not endorse the grand budget bargain crafted by his fiscal commission late last year. That will disappoint some deficit hawks and please progressives who had worried that he might call for cuts in future Social Security benefits.

Obama's emphasis on continuing the cost-cutting measures included in his signature health care legislation, his endorsement of a Social Security solution that doesn't cut benefits or include privatization, and his rejection of lower tax rates for the wealthiest two percent of Americans - a policy he failed to end last year - all demonstrated that he and his political opponents have a ways to go before finding common ground.

By Tim Fernholz

January 25, 2011