Obama's Middle Class Tax Cut May Not Survive Budget

Senate Democrats will cooperate on budget after a visit from Obama.

ByABC News
March 25, 2009, 6:41 AM

March 25, 2009 -- President Obama's budget chief hinted Wednesday that the president's signature campaign issue -- a middle-class tax cut -- will not likely survive a budget battle with Democrats on Capitol Hill.

On a conference call with reporters in advance of the president's trip to the Hill to speak before the Senate Democratic caucus, Office of Management and Budget Director Peter Orszag indicated that, while 98 percent of the budget mark-ups in the House and Senate are on par with the administration's budget blueprint, some campaign trail promises, like middle-class tax cuts, may get left on the cutting room floor.

The administration had tied the revenue raised from its environmental "cap-and-trade" proposal to the middle-class tax cuts -- known as the "Making Work Pay" tax credit for families -- both of which have been brought up as possibilities to be scrapped from the Senate and House budget resolution.

Obama's middle-class tax cut is locked in place for the next two years as part of the stimulus package he signed into law last month, but Orszag told reporters today that the White House will have to use those two years to figure out how to keep that tax cut in place for middle-class families beyond 2010.

Obama took his budget campaign to the Hill today to discuss his $3.6 trillion budget face to face with some skeptical Democrats, a day after he addressed the nation in a prime-time news conference.

Democratic leaders emerged from the 45-minute lunch expressing confidence that they will be able to work with the White House on provisions the president wants included in the budget.

The Senate will "protect President Obama's priorities -- education, energy, health care, middle-class tax relief and cut the deficit in half," said Senate Majority Leader Harry Reid, D-Nev.

"We have attempted to preserve -- and I think have preserved -- the president's key priorities," said Kent Conrad, D-N.D., the chairman of the Senate Budget Committee "All those are possible to move forward in the budget resolution I've written."

Reid said the budget will be passed next week.

Republicans on Capitol Hill have blasted the president's budget as too expensive and irresponsible because of the $7 trillion to $9.3 trillion national debt his proposals are projected to create during the next 10 years.

In his news conference yesterday, Obama had some strong words for his Republican critics.

"I suspect that some of those Republican critics have a short memory, because as I recall, I'm inheriting a $1.3 trillion deficit, annual deficit, from them," he said.

He challenged them to draft an alternate budget instead of simply criticizing his version. On Wednesday, Republicans responded to that challenge.

"Our nation is beginning to understand that the president has proposed the most fiscally irresponsible budget in the history of our nation," Rep. Mike Pence, R-Ind., said on the House floor. "In the coming hours, Republicans will unveil a better solution, to pass a budget built on fiscal responsibility and the principles of growth."

House Minority Whip Eric Cantor, R-Va., criticized Obama's budget for not having a clear focus and echoed Pence's statement that House Republicans will devise their own budget.

"The president knows that Republicans will have a budget plan that will be considered by the House, one that will set clear priorities, and focus directly on growing the economy and reducing health care costs," Cantor said in a written statement.

However, Senate Republicans plan to offer a series of amendments to the existing draft of the budget rather than a wholly alternative budget.

Vice President Joe Biden set the stage for Obama's presence at the Senate Democratic Caucus luncheon this afternoon with a lunch meeting of his own with House Speaker Nancy Pelosi, D-Calif. Both expressed words of optimism, with Biden saying he expects the budget to be consistent with what the White House has asked for.

"I know at the end of the day, we will have a strong budget supportive of the president's principles," Pelosi said.

Obama also had Orszag begin a public effort to downplay differences between the president's budget and one being fashioned by Democratic leaders who are increasingly worried about the growing deficits.

Obama argued during Tuesday's news conference that he would cut the deficit in half in the next five years. But his plans for massive federal spending to bail out the economy along with his intention to take on such hefty projects like energy and health-care reform have left many on the Hill skeptical about what it will do to the country's budgets in the coming years.

Democratic allies in the House and Senate are busy rewriting Obama's proposed budget and the president hopes a personal appeal can save much of his blueprint.

In a conference call with reporters, Orszag depicted the differences between the White House budget and congressional versions as minor.

"I think it's very clear that if you look at the budget resolutions that are being adopted by both the House and Senate, they are from the same family as the president's budget. The resolutions may not be identical twins to what the president submitted, but they are certainly brothers that look an awful lot alike," Orszag said.

After taking questions from reporters about his budget and other economic plans for nearly an hour in front of a national audience Tuesday night, the president likely found more directly consequential audience today among House and Senate Democrats.

In the second press conference of his young presidency, Obama conveyed one singular message: Times are tough, but the good times will return.

He made the case that his budget is the best way to reduce the deficit and expand economic growth "by moving from an era of borrow and spend to one where we save and invest."