The budget proposal President Obama released Wednesday sticks close to the themes of increased public investment and middle-class growth that he sounded in his reelection campaign, but it includes one notable new feature. For the first time, Obama lays out the details of the “grand bargain” on deficit reduction he’s been seeking in private talks with Republicans. It’s not clear whether the change in strategy will produce a deal; Republicans and Democrats are far apart on many issues. Nevertheless, by incorporating a more ambitious deficit-reduction plan into his budget, the president has moved the process in the right direction.
Obama has acknowledged that the federal budget is on an unsustainable path. In addition to the huge annual deficits incurred since the economy collapsed late in 2007, Washington faces a long-term threat from anticipated increases in the cost of Medicare and other popular healthcare entitlements. But the president’s earlier budgets proposed only half-measures to address the problem. Administration officials argued that previous presidents who took the lead and put out a comprehensive fiscal plan only got in the way of a congressional deal. But hanging back hasn’t worked either; since Republicans took control of the House in 2011, Washington has staggered from one fiscal crisis to another.
In his new budget,, Obama proposes his most significant deficit reduction steps to date, amounting to almost $1.8 trillion in savings over 10 years. They include lower caps on discretionary spending, fewer tax deductions for high-income Americans and some notable restraints on Medicare and Social Security. The president has set the right contours for a deal, and some of the specific proposals — including higher Medicare premiums for high-income seniors and those with generous Medigap policies, as well as a more aggressive effort to move providers to more efficient payment systems — are welcome. Other proposals, such as lower cost-of-living increases for Social Security payments and tax-law changes that make the code even more complex, should serve as no more than the starting point of a search for better alternatives.
House Republicans have sought to go further and faster, eliminating the deficit within a decade. But with so many Americans out of work, policymakers have to be careful not to cut spending so aggressively that it slows the economy or curtails investments that promote growth. Obama’s budget proposal strikes a better balance between those competing goals than the GOP’s plans have done. And by committing publicly and specifically to slowing the growth of politically sacrosanct entitlements, the president has taken a step closer to the elusive grand bargain.