President Prepares For Congressional Budget Battle

President Obama released his 2012 budget Monday, proposing $90 billion in cuts to government spending. Republicans argue that the plan does too little to cut the deficit. NPR's Ron Elving explains what's next in the contentious budget approval process.

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REBECCA ROBERTS, host:

President Obama released his 2012 federal budget this morning, all $3.7 trillion of it. Before it was even out, Republicans were saying it doesn't go far enough to reduce the deficit, which is projected to reach an all-time high in the package Mr. Obama proposed. So now the months of political wrangling begin. Meanwhile, the 2011 budget still isn't finished, so a possible shutdown of the government looms in the background.

What are your concerns about the federal government? Give us a call. I mean, not about the federal government, about the federal budget. Give us a call: 800-989-8255. Email: talk@npr.org. Or you can join the conversation at our website. Go to npr.org and click on TALK OF THE NATION.

Joining us to explain it is NPR's senior Washington editor Ron Elving. Ron, good to see you.

RON ELVING: Good to be with you, Rebecca.

ROBERTS: So the president has released his budget. What do we know about it in the couple of hours we've had it?

ELVING: Well, we've had a chance to break it down really over a slightly longer period of time because most of the key elements of it had been leaked in advance. We know, as you said, that it's $3.7 trillion. That is almost one quarter, or equivalent to almost one quarter, of what is almost a $15 trillion annual economy in the United States. And so we are talking about some enormous, enormous numbers here. And the engines that drive both the spending of the federal government and the revenue gathering of the federal government are enormous fiscal engines. And...

ROBERTS: Like what?

ELVING: Well, we're talking about the ability to tax incomes. We're talking about the responsibility, on the federal government's part, to meet all the obligations that have been made by all the presidents and Congresses that have ever sat in Washington, and that includes all the military commitments that we have around the world. It includes the enormous obligations that have already been issued, trillions and trillions of dollars in debt going back four decades and - well, really going back all the way to the beginning of the Republic.

And we also have an enormous number of promises that the federal government has made to all of us really. Social Security, Medicare, Medicaid, these are the enormous drivers that are moving money not just in billions anymore. Trillion is the new billion in Washington, and we now deal, regularly, in increments of a trillion dollars.

ROBERTS: So from what has been leaked on - the strategy of what is leaked and what is not is also interesting to talk about. But from what has actually made it to the public with time for some analysis and reflection, what are the highlights?

ELVING: One highlight, I think, is that the president is not attempting to do what everyone knows must be done on his own. He is saying I'm going to give you a budget that trims. We're going to, for example, put in a freeze on discretionary spending for the next several years so that that portion of the budget that the president and the Congress have the most control over would not grow. It would remain. And that would save a great deal of money over what would happen if it just naturally grew as much as it's been growing. So that's one way of saving some money.

And we're also trying to restrain the amount of annual deficit so that that would come down by a trillion dollars over the next 10 years. That being, in some part, the saving of some of the debt service if we borrow a little less money. But we're still going to be servicing an enormous existing national debt. And that, I think, is getting an awful lot of attention. It's going to grow by another $7 trillion even if the president got his way with respect to these budget cuts.

Now, the other thing, of course, that's very distracting - and you've already mentioned it - but it is terribly confusing, I think, for the average person who's trying to get - make some sense of the news coming out of Washington is that while we're talking about the president's budget, which is for fiscal year 2012, which begins next October 1st, next fall, we are also still struggling with the unfinished process of the current year budget which never really got done.

They didn't really do the process the way they are supposed to do in 2010. It was a political year. It was a big struggle. There was an election. The appropriations bills didn't get done. And the federal government has been funding itself by a series of what are called continuing resolutions, which just freeze everything in place temporarily. Those do not make the changes in policy that people want to make. They don't make the changes in priorities that people want to make, but they keep the government up and running.

The latest one expires on March 4th. And that could be a fiscal train wreck, as they like to say, if the president and the Congress can't get together about this year's spending. Forget 2012.

ROBERTS: Now, you talking about the priority changes that people want to make. It seems that there's a whole lot of deficit reduction talk going on this year. A lot of people were elected on that kind of rhetoric. First of all, give us a sense of the scope and the history of the deficit. And does this budget that -for 2012, the next budget, that came out this morning do much to address it?

ELVING: Well, the budget that came out this morning for 2012 is projecting that we could bring down the annual deficit, which for 2011 is projected now to be not just the one and a half trillion that we knew about. You know, here again, we didn't ever used to talk about trillions. But just in a very recent past we have moved into the trillions world. One point six trillion, that's the current projection for 2011. Bring that down all the way to 1.1 for 2012. Now, that's a big reduction, but it's still an enormous number, an unprecedented number. So that would be a step in the right direction.

This deficit, as I say, has been with us in some measure or another back throughout the nation's history. But it has exploded in recent decades for a number of reasons, having to do with both cutting taxes and committing the country to a lot of different spendings, primarily military spending and those promises to individuals - Social Security, Medicare and Medicaid. Those are the big ones. And a certain amount of discretionary spending as well. But the discretionary is really the smallest child on this particular block, and the big ones are the others that I mentioned.

That was actually brought under a species of control in the 1990s in mixed government, divided government - President Clinton, a Democrat, a very Republican Congress in the later years of the 1990s - and using the tax increases from the first President Bush and from President Clinton's first budget, and the spending cuts of the latter part of the 1990s, and most particularly using the breakneck economy, the runaway train of an economy we had in the late 1900s, especially in the dot-com boom, all those revenues came together with some spending cuts to project a balanced United States government budget for 2000, 2001, 2002, 2003. And as soon as that money started to come in and produce a surplus, everything turned around.

We had a recession. We had the 9/11. We had tax cuts. Because even before 9/11 happened, the president and the Congress, President Bush and his Congress at that time, felt that bringing in a surplus was not a good idea. We shouldn't be taxing people that much if it was bringing in a surplus. So they cut taxes.

And, of course, revenues went south because of that, because of the recession, because of the dot-com bust that followed the dot-com boom. Then we started with the wars that followed 9/11 - Afghanistan, Iraq. They dragged on for years. They were put largely off budget. They were not paid for. We expanded Medicare to include prescription drugs for seniors. That was not paid for. That was put off budget.

And so we passed a period of time in which that budget responsibility of the 1990s turned into a, well, turned into a circus, essentially of revenue decreases and expenditure increases that brought us back into the soup we're in today, with the cherry on top, of course, being the 2008 recession, the crash in the financial markets, the toxic asset recovery program that cost a lot of money, at least temporarily, then the stimulus, which cost a lot of money and that's all out the door - with those wars still continuing and with the revenues still depressed because of the post-2008 recession.

ROBERTS: Right, which obviously means we don't have the runaway economy we had in the mid-'90s, but we do have a similarly divided government. What has the Republican response been?

ELVING: Well, most recently the Republican response, driven largely by the politics of 2010, has been horror-stricken by the new levels of the federal budget deficit. Now, we saw hundreds of billions of dollars a year in budget deficits in the 1980s and in the early 1990s. That got under control, as I was saying a moment ago. Now that the deficit problem is back, it's back with a vengeance. And since 2008, with all those factors that I totaled up over that whole bad decade - since 2008 it has exploded to this trillion, trillion and a half level of deficit. And that has a lot of people in the country in shock and was largely responsibly - not solely, but largely responsible - for the rise of the Tea Party.

The new Republicans in Congress are highly responsive to the Tea Party, even the ones who aren't members of the Tea Party Caucus. Ones who have been there for decades are still highly responsive to those politics. They're worried about their own primaries coming up and they want to be responsive to the Tea Party on this question of cutting the deficit. So in the House, where they do have a majority, the Republicans are trying to cut a hundred billion dollars immediately from currently obligated spending for the current year 2011.

ROBERTS: And what are some of the targets on that list?

ELVING: Well, it's across the board discretionary world. In fact, they've even begun to extend it into security functions, not the military so much, but into homeland security, a billion dollar cut there. And cutting all kinds of social programs, community development grants - of course those are cut to some degree, lesser degree, in the president's budget as well. And any place where the number is not already fixed by something like Social Security promises or Medicare promises, the Republicans are looking to cut back in every kind of service area that the federal government participates in.

ROBERTS: And I should mention that Neal Conan will host a more detailed conversation about exactly what is in the budget and - well, answer some more in-depth, detailed questions about what is likely to be on the chopping block, coming up on another episode.

Let's hear from Shawn in Rochester, Michigan. Shawn, welcome to TALK OF THE NATION.

SHAWN (Caller): How are you doing? Nice to speak with you.

ROBERTS: Welcome to the program.

SHAWN: Thank you. I - my question is this: Where does this begin, as far as the federal government getting the authority to promise all this money. You know, I think if the federal government had their way, they'd like to participate in everything. But, you know, back in the Civil War, Andrew Jackson was very, very much against the federal government then and their ability to participate or put themselves in the middle of a lot of these things. So (unintelligible) to reiterate my question - that is, where does the federal government get the authority to come in and make these promises as far as create this budget deficit and then leave it to somebody else to clean up?

ROBERTS: Shawn, thanks for your call. Ron Elving?

ELVING: Well, the federal government took on these obligations willingly, of its own accord, a long time ago, really. The Social Security began in 1935 and Medicare, which has greatly expanded the costs of caring for our senior population, came in in 1965, which is getting to be quite a long time ago as well. It is in recent years, as people have lived longer and as inflation has driven up the costs of both Social Security and especially medical care, that programs that at first seemed relatively modest and manageable when Congress passed them in 1935, in 1965, have in our time exploded in cost and will be even more explosively costly in the 10, 15, 20, 25 years to come. That's what's happened.

It's a congressionally accepted responsibility supported by FDR in the '30s, LBJ in the 1960s. Those programs were popular and remain enormously popular today. People don't want to see them cut. And yet those are the programs with the costs, along with defense, Medicaid and a few other things, that are driving this deficit.

ROBERTS: You're listening to TALK OF THE NATION from NPR News. We have an email from Craig in Redwood City. He says: What's the current talk about the Republicans not raising the debt ceiling? And what are the odds of the USA defaulting on the national debt? And would there be a good side of doing that?

ELVING: Those are three great questions. The talk about raising the national debt ceiling, which happens periodically as we reach the...

ROBERTS: Quickly define what we're talking about there.

ELVING: Well, the federal government has, as I was saying earlier, trillions of dollars in obligations outstanding, and they've come due periodically, five-year, 10-year, 30-year, and so forth. And these various obligations have to be paid at the time they come due. And new obligations are always being issued, as I say, as the deficit and the as the deficit continues each year and adds to the previous debt, this pile of debt gets higher and has to be refinanced.

As it's refinanced, it - at a higher level, we have to go back to Congress -that is to say the administration, whoever it is, Republican or Democratic, must come back to the Congress and say give us a higher debt limit than you gave us last time you authorized us to borrow this much money. It's an ugly vote, usually. Whoever is in the majority in the Congress is more or less obligated to do it, because the United States does not want to default on its obligations. That would have enormous global implications as far as the worldwide financial system, if the most reliable country with the most reliable debt obligations were to default. Don't even want to think about it. So it's probably just talk to say that we would not raise the debt ceiling.

But if we were not to raise the debt ceiling, either the government would have to stop spending money or we would have to default on some of those obligations coming due. Now, there are lots of little wiggle arguments here. We could do this. We could do that. We could push it off for a certain number of months. It might not happen on a day certain. But basically, if we don't borrow more money and we keep spending money without taking in enough money to pay for it, something's got to give.

ROBERTS: Let's hear from Art in The Villages in Florida. Art, welcome to TALK OF THE NATION.

ART (Caller): Thank you very much. I appreciate you having me on today. I have a comment, and then I have a question, if you will, for me, please. I can't quite understand how we could ever even consider pulling funding from our most vulnerable people, such as people in the mental health clinics, people in the heating assistance programs. I can't - I don't think that's conscionable for us to even consider doing something like that, to put people on the streets or have them freeze to death.

The other question I have, though - and I'm not an economist - but with the deficits that we have and the tax relief that we're offering to our citizenry these days, how on Earth are we ever going to make any money or be able to pay these debts off if we don't increase taxes? I hear no talks about increasing taxes, and obviously we have to do that, especially with the unemployment rate as it is today. I'll hang up and listen to - online - offline. Thank you.

ROBERTS: Thank you, Art.

ELVING: This is the essential philosophical argument that we have between, if you will, people who are seen as fiscal liberals and fiscal conservatives. Fiscal liberals think we should raise more revenue by taxing those who have the most money in order to provide the services that we have historically provided to the underprivileged, to the poor, to people who might not be able to heat their homes, and to a wide variety of other worthy programs most people would say the federal government ought to do. At the same time, there is the fiscal conservative philosophy that says we are living beyond our means in that we are now taxing with the states and the local governments and the federal government more than a fifth of the total value of the economy away, and that when it gets that high in our economy or possibly in other capitalistic economies in the Western world, there starts to be a pushback, a pushback in terms of people evading taxes, taxes become less efficient, it gets more difficult to actually see the benefit of each tax increase, actually, in terms of producing revenue. So we get into arguments there of an economic nature but also of a philosophic nature. How much should the people who have give up for the people who have not? That is a philosophical, perhaps even a moral argument, for a great number of people.

ROBERTS: And we should just mention quickly that this is the first day of this budget, that a lot of things get reinstated, a lot of things get added to the cut list. It's a long process.

ELVING: Indeed. And perhaps one would have to say that these moments when it gets in the news, because the president drops his budget to the House votes for something or the Senate then votes for something, and they have a conference and it goes back and forth and on and on, there's a certain amount of kabuki theater to a lot of it too, before we get down to the actual numbers that are really written into law.

ROBERTS: NPR's senior Washington editor, Ron Elving, joined us here in studio 3A. Thanks so much.

ELVING: Thank you, Rebecca.

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