WASHINGTON – Eager to buy time and avoid economic pain, President Barack Obama urged Congress on Tuesday to pass targeted short-term spending cuts and higher taxes as a way to put off sweeping, automatic cuts that would slice deeply into military and domestic programs starting March 1.
Obama's appeal came as Congress' budget office projected a yearly federal deficit under $1 trillion for the first time in his presidency and as Republicans applied political pressure on the president to submit balanced budgets, pushing fiscal issues back to the forefront in Washington after weeks devoted to immigration and guns.
A short-term deficit-trimming measure would once again delay the broad and onerous spending cuts that are unpopular with both political parties, underscoring the government's difficulty adopting long-term budget policies. Obama conceded the problem, even though he has previously scoffed at temporary budget reprieves.
"Let's keep on chipping away at this problem together, as Democrats and Republicans, to give our workers and our businesses the support that they need to thrive in the weeks and months ahead," Obama said in a short statement in the White House briefing room.
Illustrating the challenge for the government, the Congressional Budget Office said the government will run a $845 billion deficit this year. That's down from last year's $1.1 trillion but still high enough to require the government to borrow 24 cents of every dollar it spends. The report predicted the deficit would decline to $430 billion by 2015, the lowest since President George W. Bush's last year in office.
However, as more baby boomers retire and claim Medicare and Social Security, deficits would move higher and again reach near $1 trillion in the latter portion of the 10-year window.
"We have a large budget imbalance. We have large projected deficits, debt that will remain at a historically high share of GDP and will be rising at the end of the coming decade," said CBO director Douglas Elmendorf. "What that implies is that small changes in budget policy will not be sufficient to put the budget on a sustainable path."
The slight reduction in the projected deficit for this year is due to anticipated higher revenue caused by a higher tax rate on top earners negotiated over the New Year's holiday, the end of a temporary payroll tax cut, a slowly improving economy and a slower rate of growth for health care costs.
Meanwhile Tuesday, on the House floor, Republicans took up legislation to require Obama to submit a budget that would balance within a decade or specify when it would come to balance. The move was more of an attempt at political messaging than legislation likely to become law.
Obama was to have delivered his budget to Congress on Monday, but it's not expected until next month.
The automatic cuts Obama is seeking to avoid are part of a 10-year, $1 trillion deficit reduction plan that was supposed to spur Congress and the administration to act on long-term fiscal policies to stabilize the nation's debt. Though Congress and the White House have agreed on about $2.5 trillion in cuts and higher taxes since the beginning of 2011, they have been unable to close the deal on their ultimate goal of reducing deficits by about $4 trillion over a decade.
Obama did not specify a time span or a dollar amount for a stopgap measure, and neither he nor White House aides provided any detailed spending cuts or tax increases that could be used to postpone the deeper, automatic cuts. In order to put off cuts until the end of the fiscal year, Sept. 30, Congress would have to find $85 billion in deficit reduction.
The White House insists, however, that any short-term deficit-trimming package or any long-term debt stabilization plan must consist of both spending cuts and new tax revenue. Republicans have said they will oppose tax increases.
The automatic spending cuts, known as a "sequester" in budget language, were supposed to kick in Jan. 1, but Obama and Congress identified $24 billion in deficit reduction during a New Year's agreement, thus averting the cuts until March 1.
Though that date is more than three weeks away, the White House showed some urgency in making its request Tuesday. Several Republican lawmakers had begun to signal that they might be willing to let the automatic cuts kick in as the only viable means of achieving deficit reduction, even though the reductions would cut into programs they support, such as military spending. Moreover, the White House feared the mere threat of the cuts was disruptive as government agencies began to prepare layoff notices.
"There's no reason that the jobs of thousands of Americans who work in national security or education or clean energy, not to mention the growth of the entire economy, should be put in jeopardy just because folks in Washington couldn't come together to eliminate a few special-interest tax loopholes or government programs that we agree need some reform," Obama said.
In his remarks, Obama also said a debt proposal he made in December to House Speaker John Boehner was still on the table. That plan would increase revenue by about $600 billion over 10 years and reduce spending by about $800 billion, including savings of about $400 billion in health care programs such as Medicare. It would also change an inflation formula that would reduce cost-of-living adjustments for beneficiaries of government programs, including Social Security, and would also add spending, including $50 billion for public works projects.
Obama won about $600 billion in higher taxes at the start of the year, and congressional Republicans say they are not about to approve more tax revenue. While the Senate has a Democratic majority, the House is controlled by Republicans.
"We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes," Boehner said in a statement. "The president's sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years."
Senate Majority Leader Harry Reid, D-Nev., has said that a deficit reduction package could include revenue from closing tax loopholes. He has specifically mentioned ending tax breaks for corporate jets and breaks for the oil and gas industry. Such measures, however, would result in only modest amounts of revenue. The oil and gas subsidies total about $4 billion a year; the subsidies for purchasers of corporate jets are about $300 million a year.
Business groups have been pressing for a tax overhaul that eliminates some loopholes and tax breaks, but they have also called for lower corporate tax rates.
Associated Press writer Stephen Ohlemacher contributed to this article.
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