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Obama: ‘Grand bargain' will avoid cuts

Oct. 24, 2012 - 12:30PM   |   Last Updated: Oct. 24, 2012 - 12:30PM  |  
President Barack Obama recently told an Iowa newspaper he is "absolutely confident" a deal that pares the deficit by $4 trillion will be passed.
President Barack Obama recently told an Iowa newspaper he is "absolutely confident" a deal that pares the deficit by $4 trillion will be passed. (AFP via Getty Images)
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President Obama is wading further into efforts to avoid deep cuts to national defense and domestic spending, telling an Iowa newspaper he is "absolutely confident" a deal that pares the deficit by $4 trillion will be passed.

After months of criticism about his absence in avoiding a so-called "fiscal cliff," Obama first inserted himself into the sequestration fray Oct. 22 during the final presidential debate by saying that $500 billion in cuts to planned defense spending "will not happen."

In an off-the-record conversation with the Des Moines Register, Obama expanded on his vision for how those cuts, which would be done under a process called sequestration, would be avoided. (The White House decided to make the conversation on- the -record and a transcript was released the following day.) With middle-class tax cuts passed during the George W. Bush era set to expire at year's end and the twin $500 billion cuts to domestic and defense spending also set to kick in, Obama said he believes Congress and the White House will feel so much pressure they will strike a massive deficit-reduction bill, while also keeping the tax cuts in place.

But, likely to the dismay of the defense industry and other sectors of the U.S. economy, the president seemed to suggest such a "grand bargain" will come during the first six months of the next presidential term, which will begin in late January.

"So when you combine the Bush tax cuts expiring, the sequester in place, the commitment of both myself and my opponent — at least Gov. [Mitt] Romney claims that he wants to reduce the deficit — but we're going to be in a position where I believe in the first six months we are going to solve that big piece of business.," Obama said, according to the transcript.

Though Obama is talking about avoiding the cuts for the first time, that's not good enough for House Armed Services Committee Chairman Howard "Buck" McKeon, R-Calif.

"On Monday, the president promised America's military that sequestration will not happen," McKeon said in a statement provided through a spokesman. "The very next day, when he thought the world wasn't listening, the president admits that he doesn't plan to address the issue until his next term, after [sequestration] goes into effect.

"What the president doesn't seem to understand is that these cuts will devastate the military in ways that he cannot fix after the fact," McKeon said. "By telling the American people on one day that sequestration will be fixed, and the next day saying he fully intends to allow it to happen, he continues to fuel uncertainty about hundreds of thousands of jobs."

Several groups of senators from both political parties have quietly been talking behind closed doors about how to tailor legislation that would void the defense and domestic cuts.

It appeared for months that there was no such effort going on among House members. But Sen. Chris Coons, D-Del., said during an Oct. 23 television interview that members "from both parties, both houses" of Congress are talking about how to structure a deal that would avoid the spending cuts.

Economists and lawmakers of all political stripes say if the sequestration cuts occur on Jan. 2, and if the Bush tax cuts are allowed to expire, the still-stumbling U.S. economy will plunge into a deep recession during 2013.

That won't happen, Obama told the Iowa newspaper, which is owned by the parent company of Defense News.

"It will probably be messy. It won't be pleasant," Obama said. "But I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I've been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs."

Obama is setting his hopes for coming efforts to avoid the cuts very high., w

While congressional and budget sources in recent weeks have been predicting predicted that a small bargain, that includesing bits and pieces of what would be in a grand bargain deal, is most likely.

"We can credibly meet the target that the Bowles-Simpson Commission established of $4 trillion in deficit reduction, and even more in the out-years," Obama said. "We can stabilize our deficit-to-GDP ratio in a way that is really going to be a good foundation for long-term growth. Now, once we get that done, that takes a huge piece of business off the table."

A key defense industry lobbying group on Oct. 24 applauded Obama's debate comments, and called for immediate White House-congressional talks to form a framework for a plan to avoid the sequester cuts.

Marion Blakey, president and CEO of the Aerospace Industries Association, called for compromise on both sides of the political aisle once formal negotiations begin. Over the past year, Blakey has been one of the most vocal opponents of sequestration and her organization has said the cuts would result in the loss of 2 million jobs.

"Obviously this is something that we find encouraging," said Blakey said during an Oct. 23 conference call with reporters. "[H]is comments were certainly a good step forward because if sequestration is not to happen, it has to be on basis of compromise, on the part of leadership both within the Congress, as well as with the administration."

There's agreement in Washington on one thing: As Obama said, the coming negotiations will be loud and noisy.

Obama is engaging on the issue after months of criticism from GOP lawmakers that he was not doing enough to avoid the fiscal cliff. Obama's debate comments spawned some questions about whether he had hurt his own lost some of his bargaining power when for talks that will start after lawmakers return in early November from a lengthy recess that startedbegan in September.

"I don't think it will hurt the president because I read it more as a prediction, not a promise," Todd Harrison, a Center for Strategic and Budgetary Assessments analyst, told Defense News on Oct. 23. "It's also consistent with what [Obama] administration officials have been saying for a while, and with what senior Pentagon officials have told me when I've pressed them about why they aren't planning for the sequestration cuts."

But Lawrence Korb, a former Pentagon official now with the Center for American Progress, believes the comment will come back to haunt Obama.

"It does undermine the president's bargaining power because [his then-budget chief] proposed the sequester first," Korb said the same day. "The problem now for Obama is the Republicans can say, if Obama and the Democrats continue insisting on more federal revenues, ‘We won't accept that because we know you're really not going to let these defense cuts go through.'"

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