Budget battle lines drawn

Opinion: April 20, 2011 at 12:00a.m.

In case it wasn’t clear already, we now know what the 2012 election will be about: how fast to cut federal spending, whether to raise taxes and what to do about health care, especially Medicare.

President Obama’s awkwardly named “deficit reduction framework,” unveiled last Wednesday, has the usual list of flaws of any long-term budget proposal. It doesn’t tie up every loose end. It includes a couple of “magic asterisks,” promises to cut whole categories of spending without spelling out how. That’s why it’s called a framework; it isn’t specific enough to qualify as a real budget.

But Obama’s proposal has at least two virtues. First, it puts the president back in the budget-cutting game after months in which he played rope-a-dope, asking Republicans to go first in hopes they would embrace potentially unpopular cuts. Last week, they did, in the form of Rep. Paul Ryan’s budget plan, which would turn Medicare into a voucher program. That has given Obama more courage to call for his own cuts in Medicare spending.

Second, Obama’s framework gives voters a clear choice among three paths for cutting the federal budget: one from the president, one from Ryan and one from the co-chairmen of Obama’s debt reduction commission, former Republican Sen. Alan Simpson and former Bill Clinton aide Erskine Bowles. The comparison isn’t quite apples to apples, because each plan is clear on some issues but vague on others, but it makes the choices stand out.

Budget-cutter

Almost everyone’s a budget-cutter now. Ryan proposes cutting the deficit by $4.4 trillion in 10 years; Simpson and Bowles, by $4 trillion. Obama proposes cutting the deficit by about $3 trillion over the same period. (He said he’d cut by $4 trillion over 12 years, but that was sleight-of-hand to make his plan sound as tough as the others; over 10 years, Obama’s cuts are smaller.)

On taxes, there’s an even clearer difference. Ryan and the Republicans wouldn’t increase anyone’s taxes; Ryan’s budget includes a new tax cut that would mostly flow to high-income taxpayers. Obama would increase taxes by $1 trillion over 12 years, partly by restoring higher tax rates on household incomes that exceed $250,000, a position he has long held. But he also agrees with Simpson and Bowles that a broader tax reform should raise federal revenue, in part through limits on tax deductions for such items as mortgage interest and charitable contributions.

And on health care, the differences among the plans are stark. Ryan finds most of his budget savings by cutting future spending on Medicare, on the federal health insurance plan for the elderly, and on Medicaid, the plan that covers the poor and disabled. That means changing Medicare to a voucher system. Seniors in the future would get a subsidy to buy health insurance; the subsidy’s growth would be capped at the rate of inflation. Obama countered with a loud defense of “Medicare as we know it,” and claimed that his health-care law’s Independent Payment Advisory Board — demonized by Republicans as a “death panel” — could wring savings out of the system if it were given more powers.

Medicare’s cost

Neither of those plans is a surefire answer to Medicare’s cost problems. Ryan’s free-market formula would make the voucher too stingy — and, in all likelihood, prompt a future Congress to vote for more spending. Obama’s model would depend on his panel to enforce limits on Medicare services, and on the future Congress to go along. But at least they give voters a clear choice.

If Obama’s rhetoric on Wednesday is any guide, we can expect to hear much more about that difference in the short 18 months remaining before next year’s presidential election.

Over the five months since the midterm election, Obama has deliberately struck a centrist pose, blurring distinctions between him and the Republicans. They want to cut the budget; he wants to cut it too. They wanted to renew George W. Bush’s tax cuts for high-income taxpayers; he agreed to a compromise that let the cuts continue. And last week, he made a deal on short-term federal spending that cuts $38 billion from current levels, considerably more than he originally proposed.

Liberals were beginning to worry that Obama wouldn’t fight for anything, but he’sdrawn a few bright lines, especially on taxes and Medicare.

On paper, Obama’s framework — his “budget mulligan,” a do-over from the deliberately unambitious budget he submitted in February — is intended as his opening position in negotiations toward a 2012 budget.

But the questions he, Ryan, Simpson and Bowles have now all addressed — how fast to cut the budget, whether to increase taxes, how to rein in health care costs — are far too big to resolve by June, the deadline Obama proposed. They’re probably too big to resolve by September, the beginning of the federal government’s next fiscal year. Instead, Obama’s framework and Ryan’s proposal are likely to be remembered as the opening shots of a debate that will run throughout next year’s campaigns for the presidency and Congress — a debate that will be up to voters to decide.

Doyle McManus is a columnist for The Los Angeles Times. Distributed by McClatchy-Tribune Information Services.