Obama Sees Improved Prospects for Passage of Tax, Entitlement Reforms
By Cheryl Bolen
Publication Date: 02/16/2011
President Obama Feb. 15 said the prospects for passage of old proposals to eliminate tax breaks for multinational corporations, oil, and gas companies—reintroduced into the administration's fiscal year 2012 budget—are much improved this year.
If lawmakers are serious about the deficit, not just spending, then part of what they will have to look at is unjustifiable spending through the tax code, the president said.
“I think what's different is everybody says now that they're really serious about the deficit,” Obama told reporters.
The president began his news conference by reiterating the key points of his FY 2012 budget submission to Congress, which was sent Feb. 14. The budget received predictable criticisms from House Republicans who said it spent too much, cut too little, and failed to address entitlements.
Obama said he has had and will continue to have conversations with Republicans. “I expect that, you know, all sides will have to do a little bit of posturing on television and speak to their constituencies,” he said.
But ultimately, there needs to be a reasonable, responsible, and initially probably somewhat quiet and toned-down conversation over the next few months about possible compromises, the president said.
Entitlements to be Addressed
There is agreement on both sides that no one wants the economic recovery derailed, that spending must be cut, and that deficits and the debt must be brought under control, the president said.
“And all of us agree that part of it has to be entitlements. So—so there's—there's a framework there,” he said.
The president said his budget contains some significant spending cuts, so that by the middle of this decade, annual spending will match annual revenues. “We will not be adding more to the national debt,” he said.
At the same time, his budget makes some key investments in education, science and technology, and research and development, that the American people understand is required to win the future, Obama said.
The president also reiterated that discretionary spending accounts for only about 12 percent of all spending. As a result, mandatory spending, including Social Security, Medicare, and Medicaid, will have to be addressed.
Still, Social Security is not the huge contributor to the federal deficit that the other two entitlements are, Obama said. Thus, Social Security can likely be addressed by having the parties come together and making some modest adjustments, he said.
Obama defended his budget against criticisms by House Republicans that it cut too little and that deficits would still reach $7.2 trillion under his plan by 2021.
The first step of this budget is to stabilize the current situation, while the second step is to address some of the long-term drivers of the deficits, Obama said. At the same time, short-term deficits must be brought under control, he said.
In terms of spending, there are going to be some significant disagreements about what people think is important, the president said. There will have to be compromises at the margins by both sides, he said.
Another criticism is that the president ignored much of the advice of his own bipartisan fiscal commission in preparing his budget. His response was to be patient. “If something doesn't happen today, then the assumption is it's just not going to happen,” the president said.
“So this is going to be a process in which each side, in both chambers of Congress, go back and forth and start trying to whittle their differences down, until we arrive at something that has an actual chance of passage,” Obama said.
Third Budget's a Charm
The president acknowledged that this was his third budget attempt. But the first two were submitted in the midst of the worst recession since the Great Depression, when there were different priorities.
Each of his first two budgets ran deficits and increased the national debt, but did so because it was important for the nation to avoid sinking into a depression or lengthening the recession, the president said.
“This third budget reflects a change in focus. The economy is now growing again. People are more hopeful,” Obama said. Employers are starting to hire again and businesses are starting to invest again, he said.
The complete text of this article can be found in the BNA Daily Tax Report, February 16, 2011. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2011, The Bureau of National Affairs, Inc.