BUDGET:

Veto threat raises the stakes in spending battle

President Obama last night threatened to veto any congressional attempts to increase non-defense spending, upping the ante on his bid to clamp down on discretionary spending over the next three years.

In his State of the Union address, Obama told lawmakers in no uncertain terms that he intends for them to comply with his request to freeze discretionary government spending at current levels.

"Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't," Obama said. "And if I have to enforce this discipline by veto, I will."

In an effort to make a dent in the growing federal deficit, White House officials announced earlier this week that their budget proposal would keep non-military discretionary programs at fiscal 2010 levels (Greenwire, Jan. 26). The proposal would exempt some of the largest parts of the federal budget including defense and entitlement programs, such as Social Security and Medicare.

It will be up to Congress to decide whether to comply with this request in its spending bills, and Obama pled with them last night to toe the line -- addressing critics from his own party and calling the effort vital to keep markets in line and avoid increases in the cost of borrowing.

"Now, I know that some in my own party will argue that we can't address the deficit or freeze government spending when so many are still hurting," Obama said. "And I agree -- which is why this freeze won't take effect until next year when the economy is stronger. That's how budgeting works."

Lawmakers showed a mixed response to Obama's proposal last night, with many laughing as he said the economic outlook in 2011 would be strong enough to hold up to the spending freeze. As Obama announced the veto threat, Del. Madeleine Bordallo (D-Guam) leaned over and mouthed "Wow" to her Democratic colleagues. The promise to freeze spending for three years garnered only a smattering of applause.

But lawmakers did show some enthusiasm for Obama's bid to clamp down on spending. Democrats and Republicans gave a standing ovation after he said the federal government should do the same as "cash strapped" families who are cutting their own budgets.

Key leaders on the House and Senate Appropriations Committees have said this week that they support the idea of budget restraint but will have to examine Obama's budget proposals carefully, since many programs may need spending increases.

Members of the House and Senate spending panels last night showed some hesitation to sign up for the White House budget plan. Rep. Rosa DeLauro (D-Conn.), a member of Democratic leadership and chairwoman of the House Agriculture Appropriations panel, remained seated as other lawmakers stood to applaud the budget cuts.

Other members of her committee were quick to cut down the proposal.

"I think that's a chutzpah statement by a president," Rep. Marcy Kaptur (D-Ohio), who sits on both the House Appropriations and Budget committees, said after the speech. "We have to weigh the whole of things, not just individual bills."

Kaptur also noted that discretionary spending is a relatively small portion of overall federal spending. "You can't get there from here if you only have domestic discretionary ... you're not going to be able to balance the budget there," she said.

But some appropriators said the veto threat might be enough to keep the budget in check -- while acknowledging that sticking to such budget levels may be an uphill battle for Congress.

"One of the best ways you can control spending is by vetoing spending that is ... beyond our budget," said Sen. Ben Nelson (D-Neb.), a member of the Senate Appropriations Committee. "I think he's right on target, and I hope he's able to hold the spending in line -- if not, I think he should veto."

"If he wants the freeze to really be taken seriously, he has to stand behind it with a threat," said Rep. Jack Kingston (R-Ga.), a member of the House spending panel. "That's something he has to do, and I support him in that. ... [U]nfortunately in the House, many members like to spend money, but we've got to change that culture."

Other Republicans insist appropriations bills will continue to expand despite Obama's efforts.

"They will find plenty of ways to get around it if they decide they want to," said Sen. Bob Bennett (R-Utah), a Senate appropriator who said he supports spending cuts. "I expect that is what would happen with the freeze ... find any way you can to get around it."

If Congress adheres to the spending plan, it could be a significant blow to some agencies. Lawmakers have increased discretionary programs anywhere from 8 percent to 25 percent in recent years. Because the budget would not increase with inflation, in practice the limit would essentially be a cut.

Obama's proposal is not an across-the-board freeze. The bottom line would stay flat, but the White House intends to increase some programs and decrease others. Obama said last night that he has already identified $20 billion in potential cuts for this year.

The budget freeze could be a particular strain for some natural resource programs that were vying for budget increases. For instance, oceans advocates have said that Congress needs to double the budget for the National Oceanic and Atmospheric Administration to help the agency address new demands for climate monitoring and forecasting, ocean mapping and a new federal ocean strategy and planning system.

Last year's budget forecast that NOAA would need an additional $150 million in spending this year just to keep up with procurement for two weather and climate monitoring satellites.

At the Interior Department, Secretary Ken Salazar has called for more money for the Land and Water Conservation Fund. And Fish and Wildlife Service Director Sam Hamilton has said he would like to expand the National Wildlife Refuge system and new climate change adaptation programs.

Under pressure to address the more than trillion-dollar deficit, Obama also said he will issue an executive order to create a bipartisan commission to confront budget spending. The Senate blocked a similar proposal in a vote this week. He also called for restoration of pay-as-you-go spending rules.