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A Shift in White House Budget Strategy?

Eric Chalmers of the Senate Budget Committee unpacks copies of Obama's budget for fiscal year 2016. (Tom Williams/CQ Roll Call)

For years, President Barack Obama has made a demand Republican leaders would not accept: He would only replace automatic spending cuts with a package that included a tax increase.  

Obama himself made very real threats on the subject that amounted to no revenue, no deal.  

That lasted through the failed supercommittee in 2011, was repeated on New Year's Eve 2012 as the deal came together to avert the fiscal cliff, and held through the imposition of the sequester in March of 2013. But Obama's stance started to crack when Rep. Paul D. Ryan, R-Wis., and Sen. Patty Murray, D-Wash., cut their modest, two-year budget agreement in December 2013. As the president rolled out his $4 trillion budget this week , that veto threat was nowhere to be found.  

Press Secretary Josh Earnest stopped just short of issuing one when asked by CQ Roll Call Wednesday about the possibility of replacing sequester cuts with other cuts — like the $400 billion in health care savings in Obama's own budget.  

But Earnest came close. He said it wouldn't be "fair" for seniors and the middle class to bear all of the burden of deficit reduction.  

Here's part of the exchange from the White House briefing, with key points highlighted in bold:

Earnest: "I do think that there is a principle that does endure to this day, which is the president believes that to the extent that we're looking to reduce the deficit even further, that we need to pursue a balanced approach in doing so. And just asking the middle class or the elderly to bear the burden of reducing our deficit, it's not fair," Earnest said. "It's also not the best way for us to keep our — the commitment to our seniors. It's also not the best way to grow our economy. Our economy grows best when it's growing from the middle out. And asking our middle class to bear the burden alone of reducing the deficit, that doesn't make a lot of economic sense. And that is a principle the president has previously articulated and it's one that continues to apply today." CQ Roll Call: "Is that actually still a veto threat, though? In the past, he said, 'I will veto.' I haven't heard that — that 'V' word on — on a sequester replacement that does not include revenue." Earnest: "And the reason simply is that we haven't seen a specific piece of legislation from Republicans. And that is typically when we'll use the 'V' word, as you described it. So, I'll withhold that word for now, but that principle is firmly in place."
A couple of points:  

Earnest's statement about "balance" was about further deficit reduction, and replacing the sequester would not actually be deficit reduction but would instead be deficit-neutral.  

So it remains to be seen if the White House could agree to Obama's own proposed spending cuts to pay for his priorities like rolling back the sequester. His $400 billion package of health care savings, for example, would be about enough to pay for rolling back the sequester for the next two years and also fund Obama's six-year transportation package.  

That's the kind of thing the White House has steadfastly refused to consider before, but which theoretically could get bipartisan support in Congress.  

The political reality is that Obama's push for another net tax increase has essentially no chance of passage, a fact that may slowly be sinking in even at this White House.  

For starters, Republicans are now fully in charge of Congress. They already are passing bills in the House to permanently cut taxes for businesses, not raise them, and leaders have declared Obama's latest plans to tax the rich dead-on-arrival.  

Then there is the famous Americans for Tax Reform anti-tax pledge signed by the vast majority of House and Senate Republicans. Obama's decision to sign permanent tax relief in 2012 without getting a permanent solution to the sequester effectively crippled his leverage . From that point on, Obama needed to come hat-in-hand to the GOP, and any income tax hike would be a pledge violation. Before that point, he had the club of trillions of dollars in expiring Bush-era tax cuts to force them to the table.  

Almost any permanent tax deal would have been pledge-compliant before the fiscal cliff deal was signed, because the package scored as a massive tax cut. Grover Norquist, the president of Americans for Tax Reform, blessed the fiscal cliff deal as a result.  

Obama's statement on New Year's Eve 2012 seemed to overlook the new reality, particularly with regard to sequestration cuts, which were delayed a mere two months by the deal — a fact that remains a bitter subject for congressional Democrats.  

Here's the relevant portion of Obama's remarks that fateful night, with his implied veto threats in bold:

"And I want to make clear that any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced, because, remember, my principle always has been let’s do things in a balanced, responsible way. And that means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts, as well as spending cuts. Now, the same is true for any future deficit agreement. Obviously we’re going to have to do more to reduce our debt and our deficit. I’m willing to do more, but it’s going to have to be balanced. We’re going to have do it in a balanced responsible way. For example, I’m willing to reduce our government’s Medicare bills by finding new ways to reduce the cost of health care in this country. That’s something that we all should agree on. We want to make sure that Medicare is there for future generations. But the current trajectory of health care costs has gone up so high, we’ve got to find ways to make sure that it’s sustainable. But that kind of reform has to go hand and hand with doing some more work to reform our tax code, so that wealthy individuals, the biggest corporations, can’t take advantage of loopholes and deductions that aren’t available to most of the folks standing up here; aren’t available to most Americans. So there is still more work to be done in the tax code to make it fair, even as we’re also looking at how we can strengthen something like Medicare. Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone — and you hear that sometimes coming from them, that sort of after today we’re just going to try to shove only spending cuts down, you know, well — shove spending — shove spending cuts at us that will hurt seniors, or hurt students, or hurt middle-class families without asking also equivalent sacrifice from millionaires or companies with a lot of lobbyists, et cetera. If they think that’s going to be the formula for how we solve this thing, then they’ve another thing coming. That’s not how it’s going to work. We’ve got to do this in a balanced and responsible way. And if we’re serious about deficit reduction and debt reduction, then it’s going to have to be a matter of shared sacrifice. At least as long as I’m president."
Republicans have had the exact opposite message ever since: Obama had extracted his tax increase and they would not give another inch.

And GOP leaders are taking a wait-and-see approach on whether the White House might really show new flexibility this year.

"Republicans have always believed the sequester should be replaced with smarter cuts and have passed responsible legislation to do so multiple times, only to see the president demand more tax hikes," said Cory Fritz, a spokesman for Speaker John A. Boehner, R-Ohio. "Until the president gets serious about solving our long-term spending problem it's hard to take him seriously."  

While Obama didn't reiterate his sequestration veto threat this week, he did imply a new one, one that could theoretically force a government shutdown showdown in September.  

"I’m not going to accept a budget that locks in sequestration going forward. It would be bad for our security and bad for our growth," Obama said Monday.  

CQ Roll Call asked Earnest about those comments too, and whether it represented a veto threat on GOP spending bills that kept to sequestration levels.  

Here was part of the press secretary's answer:

"I'm not sure this qualifies, simply because we haven't seen a piece of legislation from Congress. So we typically issue veto threats around specific bills. But I do think that the President is very firm in his belief that the mindless, across-the-board cuts that we've seen as a part of the sequester have been bad for our economy and they certainly have not been helpful to our national security.

"And I recognize that there’s actually some bipartisan agreement around that. And so we're going to be working in bipartisan fashion with Congress to make some of those changes to the budget in a way that reflects bipartisan common ground, because that's going to be what’s required to actually pass these funding bills, but also reflects a focus on our core priorities, which is protecting the country and protecting the middle class."

Thus starts a budget dance that, if past is prologue, won't get resolved until some time after the Oct. 1 start of the next fiscal year.    

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