Republican Budget Cuts: Savvy Savings or Political Compromise?

Feb. 4, 2011— -- Republicans unveiled their 2011 budget spending cuts Thursday, which they say will save $74 billion when compared with the budget President Obama plans to roll out Feb. 14, but passage could face a number of hurdles.

The cuts mainly target federal agencies' budgets.

House Republicans, led by Rep. Paul Ryan, R-Wis., suggested cutting agency budgets by nearly 20 percent, a move that the White House warned could result in the loss of a number of key federal jobs.

The Food and Drug Administration and the Departments of Agriculture, Commerce and Energy would see the biggest impact, while the congressional budget would remain virtually intact. Obama had requested a budget increase to all federal agencies, except the Departments of Energy, Agriculture, Rural Development, and the FDA.

Appropriations Committee Chairman Hal Rogers, R-Ky., said House Republicans would find additional ways to meet the $100 billion in spending cuts that the GOP promised during the midterm electoral campaign, which could translate into some controversy.

Sen. Rand Paul, R-Ky., for example, has called for an 83 percent cut in funding for the Department of Education, and a massive reduction in U.S. foreign aid, including to key U.S. ally and top recipient Israel.

But moving forward with these cuts will not likely come easy, as Democrats still control the Senate, and the White House oppose such deep cuts.

But the proposals pave the way for a new fight along partisan lines that could come to a boil in 2012.

"We are going to give it our best shot. I think we are going to have extraordinary Republican unity, and the question is going be ... how many of the 23 Democrats up in '12 are going to crack and come over and join us to significantly reduce spending," Senate Minority Leader Mitch McConnell, R-Ky., said in an interview today with conservative radio show host Laura Ingraham.

Republican Budget Proposal Paves Way for Partisan Fight

Republicans have tried to tie Democrats' resistance to these cuts to lobbying by special interest groups, referring to an e-mail by a top staff member obtained by ABC News that called for a Jan. 24 meeting of lobbyists and the interest groups that would be hit hardest by expected cuts to the Labor and Heath and Human Services budgets.

Obama is set to release his own budget the same week that the House will begin to debate the budget proposals. It will include a ban on earmarks, and a five-year freeze on nonsecurity-related discretionary spending, which he called for in his State of the Union address Jan. 25. The president's proposal could save, according to some estmates, about $400 billion.

The Democrats' and administration's measures to boost spending in the past two years have garnered heavy criticism from conservatives, who say such federal programs as the American Recovery and Reinvestment Act, a stimulus bill, and the Troubled Asset Relief Program added too much to the deficit.

Economists say some of those measures actually served the public well, and that the deficit, currently at $1.3 trillion, is likely to decline as the economy improves.

A "large budget deficit is helpful in that it's supporting demand," Till Von Wachter, associate professor of economics at Columbia University, said at a Senate hearing Thursday. "Having said all of that, I think I would entirely agree that we need to reduce these budget deficits moving forward when the economy is clearly off and running. ... We should engage in the kind of discipline necessary to ensure that we do not crowd out private investment."