Aide: Obama has deficit-reduction plan

Monday, February 18, 2013

— President Barack Obama is ready to work with Republicans on a plan to avoid automatic budget cuts that could cripple U.S. defense and programs vital to the middle class, White House Chief of Staff Denis McDonough said.

The president has a plan to reduce the deficit by $1.5 trillion, and Obama will insist that the changes happen in a “balanced way,” which includes revenue increases, McDonough said on ABC’s This Week program, one of three appearances he made Sunday on the morning’s news shows.

“This is not an ideological effort,” McDonough said. “This should not be a social-science experiment. This should be a question where we ask ourselves, ‘What is most important to the economy? What is most important to the middle-class families of this country?’”

The U.S. economy stalled during the last three months of 2012, marking the worst quarter since the recession ended 3 1/2 years ago, as defense spending tumbled by the most since 1972. Without action by Congress, the federal government is poised next month to begin the first round of $1 trillion in budget cuts set to occur over the next nine years, adding another potential drag to the economy.

The cuts, called the sequester, would drain $85 billion from the government’s budget over the coming seven months. Actual cuts may be around 13 percent for defense and 9 percent for other programs because lawmakers delayed their impact, requiring savings over a shorter period of time. The White House last week let loose a list of ways Americans would feel the trims, from longer waits at airport security to as many as 13,000 teachers being laid off. Outgoing Secretary of Defense Leon Panetta told a congressional panel the sequester would hollow the U.S. military because it would give the Pentagon little leeway in deciding how best to spend the money.

Republicans stood firm in opposing any plan that relies on increased revenue to close the budget gaps. With no budget from the Senate and few specific details from the president about spending cuts, it looks like the automatic, across-the board reductions will take place, Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, said.

House Republicans oppose raising revenue by closing tax provisions because that wouldn’t do much to close the deficit, Ryan said. At the same time, it would make comprehensive a tax overhaul, which is essential to improving the economy, much harder to do later, he said.

“We want to prevent a debt crisis from hurting those who are the most vulnerable in society, from giving us a Europeanlike economy,” Ryan said. “In order to do that, you’ve got to get the debt and deficit under control, and you’ve got to grow the economy.”

On Fox News Sunday, Sen. Lindsey Graham, R-S.C., recalled the president’s position on the sequester in the fall. “The president promised in the campaign sequestration would not happen. Now, he is allowing it to happen.

“He’s the commander-in chief and on his watch, we’re going to begin to unravel the finest military in the history of the world, at a time when we need it most,” Graham, a member of the Armed Services Committee added. “If you want to look at ways to find $1.2 trillion in savings over the next decade, let’s look at Obamacare. Let’s don’t destroy the military and just cut blindly across the board. There are many ways to do this.”

However, Graham offered no specifics.

Senate Democrats have proposed delaying the automatic spending reductions by 10 months, offering an alternative $110 billion plan that would cut defense spending, end direct aid payments to farmers and set a minimum income tax rate on top earners.

The Congressional Budget Office estimates that the automatic cutbacks could subtract 0.6 percent from the gross domestic product’s growth this year, enough to eliminate 750,000 jobs.

Sen. Chuck Schumer, D-N.Y ., a close ally of the White House, predicted that Republicans will eventually join Democrats to avoid the cuts.

“They have no choice,” Schumer said. “Their arguments are untenable and don’t meet the favor of hardly anyone other than themselves and the special interests they’re protecting.” Information for this article was contributed by Jeff Plungis and William Selway of Bloomberg News; and by The Associated Press.

Front Section, Pages 3 on 02/18/2013