Hurdles rise for Obama budget

President Obama’s $3.55-trillion budget has stumbled into a series of economic and political pitfalls that threaten to undercut his grandest ambitions.

The chairman of the Senate Budget Committee on Thursday projected deficits far higher than the Obama administration had calculated, possibly as much as $1.6 trillion higher over the next 10 years. The nonpartisan Congressional Budget Office is expected to issue a similar assessment today.

That bad news, combined with other recent developments, portends a rocky road for the Obama budget, which was initially hailed by congressional Democrats for promoting such liberal priorities as expanded access to health insurance and curbs on global warming.

In the three weeks since the budget was unveiled, fiscally conservative Democrats have raised concerns about proposed spending increases. Leaders of the House and Senate tax-writing committees have criticized some of Obama’s proposed tax increases on wealthier Americans. And influential Democrats are backing away from using a legislative shortcut that may be Obama’s best hope for passing his far-reaching health and energy policies.

An additional multibillion-dollar bailout for banks and other financial institutions, which the administration will soon propose, is expected to add more pressure to the federal government’s finances.

Into that tinderbox, a lit match has come from new deficit estimates.

Where Obama’s budget foresees rolling up $7 trillion in cumulative deficits over the next 10 years, Sen. Kent Conrad (D-N.D.) on Thursday pegged the deficits at $1.6 trillion higher over that period.

Conrad, chairman of the Senate Budget Committee, said the figure was calculated by his panel’s Democratic staff members.

The Congressional Budget Office report today is expected to reflect a worsening deficit outlook in part because economic conditions have deteriorated in the two months since the administration set its budget assumptions. The office is expected to project lower revenue and higher spending than what Obama’s budget assumed.

Sen. Ben Nelson (D-Neb.), one of about 15 moderate Democrats concerned about Obama’s spending levels, said the White House might have to reassess its priorities in light of the new estimates.

“That will influence what we might think is the appropriate level of spending -- what might be put off to another budget, what we can pursue incrementally,” said Nelson, a member of the budget panel.

“I think this budget is in for some tough sledding,” said Sen. Lindsey Graham (R-S.C.). “Some components of his budget are going over like a lead balloon.”

But House Speaker Nancy Pelosi (D-San Francisco) was undeterred.

“Our priorities are the same,” Pelosi said. “You can’t say we are going to do less because those numbers are pessimistic.”

The White House also said the projections would not force a change in course.

“It’s not productive to constantly be chasing your tail and, as things change every day, revise your numbers,” said Kenneth Baer of Obama’s budget office.

The year’s budget debate formally begins next week, when House and Senate committees are expected to draft a budget resolution, which is a nonbinding blueprint that sets spending and tax priorities for the year. Democratic leaders hope the full House and Senate can act on those plans the following week, before Congress begins a spring recess.

Congressional sources familiar with the Congressional Budget Office analysis would not discuss its details because the numbers were still being revised. But the sources did not dispute a report in Politico on Thursday that the deficits, over 10 years, would be more than $1 trillion higher than Obama’s budget anticipated.

“The early word is that the latest numbers will make an already difficult task even more difficult,” said Sen. Thomas R. Carper (D-Del.).

Sen. Judd Gregg (R-N.H.) said, “They are going to show that the situation under the president’s budget is much worse than he presents.”

The budget debate marks the beginning of a new chapter for congressional Democrats and the Obama administration. Most of the bills lawmakers have voted on so far -- the economic stimulus package, wage protections for women and an expansion of healthcare coverage for children -- have involved little political risk.

But the budget will force Congress, for the first time this session, to make tough choices between competing priorities.

“Up until now, it’s been a relatively easy road for many of us to oppose what Republicans are doing and support a very popular president,” said Rep. James P. Moran (D-Va.), a senior member of the House Appropriations Committee. “Now we will have to help him govern and have to take far more difficult votes.”

Already, Obama this week bowed to pressure from Congress and veterans groups opposed to his proposal to save $530 million by requiring combat-injured veterans to pay for some of their medical care through private insurance.

Moran said he expected Democrats to be divided over Obama’s proposal to set aside $634 billion for a healthcare overhaul.

Some Democrats and administration officials would like the healthcare plan, as well as Obama’s climate change proposal, to be included in a fast-track budget procedure called reconciliation. It is a bill that cannot be filibustered in the Senate, which means Democrats could pass it with 51 votes, instead of the 60 it takes to overcome a filibuster.

The Obama administration has not ruled out the possibility of folding the sweeping healthcare and energy initiatives into reconciliation. Republicans have protested because the tactic would effectively remove any incentive for Democrats to get GOP support for legislation that would include some of the biggest policy changes in decades.

But the administration also faces opposition from influential Senate Democrats. Conrad, the chairman of the budget panel, said reconciliation should not be used for such major policy changes.

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janet.hook@latimes.com

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Christi Parsons in our Washington bureau contributed to this report.