POLITICS:

Obama, entering the budget fray, warns against clean energy cuts

President Obama braced for months of tense budget negotiations yesterday by warning Republicans that clean energy funding and other "win the future" priorities will be defended during a summerlong assault on national spending.

His address comes at the headwaters of an economic debate that will likely consume Congress until October, when the 2012 budget is supposed to be in place. Before then, lawmakers will negotiate a contentious measure to raise the national debt limit, with visions of rising red ink and an American default to China acting as a backdrop.

Obama entered the debate yesterday by releasing an economic outline calling on Congress to enact "tough cuts" in next year's budget. Those reductions and other measures would set the country on a course toward shrinking the deficit by $4 trillion over 12 years, Obama said.

His speech at George Washington University provided an alternative to the Republican budget plan released last week by Rep. Paul Ryan of Wisconsin, whose effort Obama described as "deeply pessimistic" for proposing a 70 percent cut to clean energy programs, its overhaul to Medicare and reductions to other public programs.

"I will not sacrifice the core investments we need to grow and create jobs," Obama said. "We'll invest in medical research and clean energy technology. We'll invest in new roads and airports and broadband access. We will invest in education and job training. We will do what we need to compete, and we will win the future."

Obama also confronted Republican assertions that the deficit must be reduced exclusively through slashed spending. His plan would raise new revenue through higher taxes for wealthy Americans while canceling tax benefits for corporations, amounting to $1 trillion in savings by 2024.

White House: no carbon revenue

The president is not considering raising revenue through taxes or fees on carbon dioxide emissions, according to a senior White House official. Some economists believe that restrictions on greenhouse gases could be freshly cast through the lens of reducing the deficit while avoiding higher income taxes.

"As the budget negotiations continue and get down to the bottom line, people could see this as an effective way to raise revenue," said Michael Greenstone, former chief economist of the president's Council of Economic Advisers. "After all, there's an opportunity to tax the thing we don't like -- carbon -- and reduce taxes on the thing we like, which is income."

The European Union, coincidentally, proposed a carbon tax yesterday on fuels for transportation and home heating. It faces opposition because of its potential impact on gasoline prices; supporters, however, say it's designed to make biofuels less expensive. The carbon tax would expand the bloc's cap-and-trade program limiting greenhouse gas emissions.

Sweden, Finland and the Canadian province of British Columbia represent a handful of governments that have adopted carbon taxes. Australia is also debating whether to use one.

As recently as last year, Obama sought to raise revenue through carbon fees. That attempt was widely used by Republican candidates to attack Democrats in last November's elections for seeking to raise utility prices. That lesson has not been forgotten.

"If it became politically acceptable to look for new revenue, then it would be sensible to take a look essentially at consumption taxes, which would include taxes on energy as opposed to increasing taxes on investment, capital gains or taxes on labor," said Robert Stavins, a Harvard University economist. "However, in the current political climate, that could be doing the right thing in terms of making a statement, but it would neither be successful and it would ultimately be counterproductive, because it's going to hurt [the climate effort]."

When asked if Obama was considering carbon fees to raise revenue, a senior White House official briefing reporters yesterday said, "The president has not proposed or supported that proposal."

A broken 'olive branch'?

But Obama has heightened his defense of clean energy since the State of the Union address more than two months ago. He mentioned it four times in his speech yesterday, often in sharp defense against Ryan's budget plan, which he described as a vision of defeat.

"And worst of all, this is a vision that says even though Americans can't afford to invest in education at current levels, or clean energy, even though we can't afford to maintain our commitment on Medicare and Medicaid, we can somehow afford more than $1 trillion in new tax breaks for the wealthy," Obama said. "Think about that."

Obama invited Republican and Democratic leaders to the White House yesterday morning to reveal his message before going public. He also invited Ryan and other former members of his bipartisan fiscal commission, from which Obama lifts themes to use in his budget plan, to yesterday's speech.

Ryan believed that was "an olive branch."

"Instead, his speech was excessively partisan, dramatically inaccurate, and hopelessly inadequate to address our fiscal crisis," Ryan said in a statement, describing it as a "political broadside from our campaigner-in-chief."

GOP will search for failures

But clean energy advocates were encouraged by Obama's repeated reference to a sector that is adding jobs to the American workforce, providing homegrown energy and competing with China and Europe for new technologies.

"The president laid out a path that explained why investments as well as spending reductions are critical," said Joshua Freed, director of the clean energy program at Third Way, describing Obama as a CEO of an indebted company. "That means you invest in new products, in your staff, in bringing in new customers. Clean energy is one of those new product lines that grows the economy."

Paul Bledsoe, a senior adviser at the Bipartisan Policy Center, said: "The president has consistently cited the clean energy sector as a critical new market for the U.S., domestically and internationally. He views it as one in which our technological prowess and innovative ingenuity gives us a competitive advantage."

Examples of American technologies, he said, include wind turbines, solar equipment and batteries.

"You name it," Bledsoe said. "The Chinese did not make most of the technology that they're benefiting from."

Still, the debate over energy spending promises to be a long, grueling affair. It won't be limited to soaring presidential rhetoric about emerging products and America's greatness. It will also focus on wasteful spending in energy programs and the government's ability to produce successful technologies, said Mark McIntosh, a former official with the White House Council on Environmental Quality under President George W. Bush.

"I just think that it's folly to think that the status quo is going to continue," McIntosh said. "There's going to be a need to review how those programs are administered and make cuts where they make sense, while preserving those programs that really help build out that manufacturing base that the country needs."

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