Aug. 18 (Bloomberg) -- President Barack Obama is seeking to revive a version of the so-called grand bargain with congressional Republicans that would combine long-term U.S. deficit reduction through entitlement benefit cuts and tax increases with immediate steps to boost job growth.
Obama plans to press Congress for billions of dollars in fresh spending to reduce unemployment as he also pursues a compromise on long-term deficit cuts. He will begin by laying out his ideas in a speech shortly after the U.S. Labor Day holiday, which is Sept. 5.
With the U.S. unemployment rate at 9.1 percent and economic growth slowing, Obama’s aides are working on a mix of tax cuts and infrastructure spending beyond the measures he has been promoting over the last several weeks, an administration official said, speaking on condition of anonymity because details for the speech haven’t been completed.
Separately, Obama will present to a special 12-member congressional committee charged with coming up with at least $1.5 trillion in deficit reduction his own proposal for making deeper cuts in the nation’s debt. It will include raising government revenue as well as cutting entitlement programs such as Social Security and Medicare, along the lines of the scuttled deal he tried to strike with House Speaker John Boehner in July.
“I don’t think it’s good enough for us to just do it part way,” Obama said yesterday at a town hall event in Atkinson, Illinois. “If we’re going to do it, let’s go ahead and fix it. And if we’re going to fix it, the only way I believe to do it in a sensible way is you’ve got to have everything on the table.”
The administration is seeking a larger long-term deficit deal to make room for short-term spending aimed at boosting the economy at a time when growth has slowed and consumer confidence is lagging.
Morgan Stanley & Co. yesterday lowered its forecast for economic growth next year to 2.25 percent from 3 percent, citing declines in business and consumer confidence.
The benchmark Standard & Poor’s 500 Index rose 0.1 percent yesterday to close at 1,193.89. The index had rallied 7.5 percent over the three days through Aug. 15 amid a decline in jobless claims, an increase in retail sales and better-than-estimated profits. The S&P 500 is still down 12 percent from April 29 on concern about Europe and an economic slowdown.
“More stimulus would benefit the economy, and that would surely be a good thing,” said Paul Dales, senior U.S. economic adviser for Capital Economics Ltd. in Toronto. The impact “would depend on the size of the overall measures as well as what they are and when they take place.”
Getting Through Congress
“The great issue is whether any such proposals would get through Congress,” he said.
Republican congressional leaders are already lining up in opposition to more federal spending.
“The American people understand that Washington can’t keep spending money it doesn’t have,” Boehner, an Ohio Republican, and Majority Leader Eric Cantor of Virginia wrote in an opinion article published in USA Today. “They want to see less government -- not more taxes.”
Senate Republican leader Mitch McConnell of Kentucky said in a statement yesterday that Obama has “finally” reached the conclusion that reducing the deficit will help the economy.
“But continuing the spending spree on failed stimulus programs won’t shrink the deficit,” he said.
Obama said the country doesn’t have to choose between deficit reduction and measures to stimulate the economy and create jobs.
‘We can do both in a sensible way,” he said.
Steps to spur jobs and raise revenue were part of the discussion on a deal for deficit reduction and raising the debt ceiling between the White House and Republicans before talks broke down in July.
In an interview yesterday with CBS News, Obama said that he wished Boehner “had taken me up on a grand bargain to deal with our long-term debt and deficit.”
“I will be putting forward a plan that will be similar to the plan I put forward to the speaker,” Obama said in the interview broadcast last night.
To offset the cost of the new initiatives, Obama will seek additional long-term deficit reduction.
The administration wants “aggressive” steps on the deficit “because it helps you pay for the kinds of things you need to do in the near term to grow the economy and create jobs,” White House press secretary Jay Carney said on MSNBC’s “The Daily Rundown” program yesterday, without giving specifics.
Obama yesterday wrapped up a three-day bus tour through Minnesota, Iowa and Illinois and is scheduled to leave for a 10-day vacation at Martha’s Vineyard, Massachusetts, later today.
The president used his trip through the Midwest to repeatedly call on voters to pressure Congress to embrace measures that could improve the economy. At a forum on the rural economy in Peosta, Iowa, on Aug. 15, he questioned “the refusal of a faction of Congress to put country ahead of party” and the “politics of the short term.”
“I need you to send a message,” Obama said yesterday in Illinois. “I need you to send a message to folks in Washington: Stop drawing lines in the sand, stop engaging in rhetoric instead of actually getting things done.”
He also sought to counter Republican opposition to raising taxes for the wealthiest Americans, citing a New York Times opinion article written by billionaire Warren Buffett. The Berkshire Hathaway Inc. chairman and chief executive wrote that the nation’s richest individuals have been “coddled” and that he paid a smaller percentage of his taxable income to the government than anyone else in his office.
“These days, the richer you are, the lower your tax rate,” Obama said. “That can’t be something that is defensible regardless of party.”
Adding to the political hurdles in front of any administration proposals, voters are skeptical of both Obama and Congress. Obama’s job approval rating was 40 percent in a Gallup daily tracking poll taken Aug. 14-16 and it hit 39 percent the day before, the lowest since he took office. Congressional approval was at 13 percent, tying an all-time low, in a Gallup Aug. 11-14 poll.
That was the sentiment of Jerry Smith, a dairy farmer and a registered Republican who was among the crowd that got a surprise visit from Obama yesterday at the Whiteside County Fair in Morrison, Illinois.
“It’s a big mess,” he said. “You can blame it on everybody.”
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