U.S. Budget Week: Obama Budget Likely to Fortify Fiscal Divide

Published Feb 21, 2014. By John Shaw. In Market News International (MNI).

WASHINGTON (MNI) - While President Barack Obama is not set to officially unveil his fiscal year 2015 budget until March 4, the White House said this week that he will not resubmit an earlier proposal to shift to a chained consumer price index for use in cost of living increases.

Obama will submit his FY 2015 budget in about 10 days and White House officials said he will adhere to the two-year discretionary spending agreement that was forged last December by House Budget Committee Chair Paul Ryan and Senate Budget Committee Chair Patty Murray which set discretionary spending at $1.014 trillion.

The decision of the president to pull back from the chained CPI proposal which he embraced last year as a cost savings step, has spawned forceful and partisan reaction.

A number of congressional Democrats praised the decision, saying that Obama made the proposal last year in the hope it would induce Republicans to reciprocate with a concessions for additional revenues such as through loophole closures. They charged that the GOP has remained intransigent on revenues and Obama should not negotiate with himself.

"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," Senate Majority Leader Harry Reid said Thursday in a statement.

A spokesman for House Speaker John Boehner Thursday blasted Obama's decision as showing a lack of commitment to long-term fiscal responsibility.

"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. "The one and only idea the president has to offer is even more job destroying tax hikes, and that non-starter won't do anything to save the entitlement programs that are critical to so many Americans. With three years left in office, it seems the president is already throwing in the towel."

Obama's budget will call for closing some tax loopholes and using those revenues for a $56 billion spending initiative on energy, manufacturing and education.

Budget experts were not surprised by Obama's move on the chained CPI, but several said it was a disappointing reversal.

"I understand the politics of the decision, but it's a clear step backward," said Bob Bixby, executive director of the Concord Coalition.

"The President isn't running in November but congressional Democrats are and they apparently don't even want this as part of the fiscal discussion. That's unfortunate. And coming on the heels of the bipartisan retreat on military COLAs, this is a further indication that we're moving backwards on long-term fiscal issues," Bixby said.

(Bixby was referring to recent congressional votes to rescind a recently enacted 1 percentage point reduction in cost-of-living adjustments for veterans under 62.)

He added: "As I see it, the president, having proposed a chained CPI before, should have stayed with it. He's already taken the political hit and it would show his commitment to serious fiscal reform and a continuing openness to a Grand Bargain."

Bill Frenzel, a former Republican congressman who is now a guest scholar the Brookings Institution, said Obama's move hurts the fiscal debate.

"The president has been a limp player on budget issues and the chained CPI was the one strong position he has taken. To reverse himself now is hugely disappointing. He is supposed to the president, the leader of the country, not the bargainer in chief. His reversal makes it look like he sees the budget debate as just a Turkish bazaar," Frenzel said.

Stan Collender, a budget expert at Qorvis Communications, said Obama had little to gain either politically or substantively in persisting with a proposal that Congress is never going to approve in the current political environment

"It was a necessary strategic move," Collender said, regarding Obama's chained CPI decision.

"It's just not possible to discuss Social Security in a rational way now, so there is nothing to be gained by offering a proposal that will just attract opposition. Why should he bang his head on the wall and actually make it harder to achieve the goal of reforming Social Security in the longer term? This can only happen with bipartisan support," Collender said.