Much more than he has in past months, Mr. Obama has spent this week combining his pitch for deficit reduction with a renewed emphasis on the need for further temporary spending and tax cuts to encourage businesses to hire and consumers to spend, going beyond proposals like continued payroll-tax relief.
Until the economy showed fresh signs of weakening lately, Mr. Obama had all but shelved additional stimulus proposals, given Republicans’ opposition. But even before he has disclosed details of his proposals — including new tax incentives for hiring, public works measures and state aid for teachers — Mr. Obama has essentially dared Republicans to try to block them, suggesting the onus is on Republicans to prevent a recovery-threatening impasse.
“My basic argument to them is this: We should not have to choose between getting our fiscal house in order, and jobs and growth,” Mr. Obama told an audience Wednesday in Atkinson, Ill., on the final day of his three-day bus tour through Minnesota, Iowa and Illinois.
As for deficit reduction, Mr. Obama suggested that he would call in his speech for the bipartisan 12-member Congressional committee that was created by his debt-reduction deal with Republicans this month to be more ambitious about deficit-reduction than its formal charge requires — including tax increases on the wealthy, which Republicans oppose.
“I’m going to make a presentation that has more deficit reduction than the $1.5 trillion that they’ve been assigned,” he said.
He said the ultimate goal should be $4 trillion in savings over 10 years. Counting the $1 trillion in cuts already agreed to in the debt-limit deal, that would suggest that the committee — and Mr. Obama — would have find $3 trillion more. But he will not seek that much.
“We’ll have more spending cuts than we have revenue,” he said, after expressing concern that Speaker John A. Boehner of Ohio had named Republicans to the panel who oppose any tax increases. “But we’re going to have to take a balanced approach,” Mr. Obama said, without “drastic cuts” in Medicare and Medicaid — though he made clear that changes to those fast-growing programs must be on the table.
The president’s plans for a speech with a broad economic agenda comes after months in which Republicans have ridiculed him as not having a detailed debt-reduction plan, and many supporters have urged him to show more leadership — and more fight — in the battle over the size and role of government.
Yet Republican leaders served notice that they would oppose stimulus measures now or higher tax revenues later. That signals another contentious budget battle this fall, after the summer-long chain of events that ended with the relatively modest deficit-reduction deal, which cleared the way for a needed increase in the nation’s debt limit but also provoked Standard Poor’s to downgrade the United States credit rating and contributed to days of market turbulence.
In a memorandum to House Republicans on Wednesday, Representative Eric Cantor of Virginia, the majority leader, said their agenda must include “stopping the discussions of new stimulus spending with money that we simply do not have.” He accused the president of waging “class warfare” — Republican code for Mr. Obama’s proposed tax increases on high incomes.
Senator Mitch McConnell of Kentucky, the Republican minority leader, criticized “job-killing tax increases” and said, “Continuing the spending spree on failed stimulus programs won’t shrink the deficit.”
Many economists argue that while temporary spending and tax cuts add to deficits initially, such measures can increase tax collections, reduce costs for safety-net programs and ultimately keep deficits smaller than otherwise by spurring business activity and lowering unemployment. How economists would judge Mr. Obama’s proposals will depend on their details; contrary to Republicans’ claims, economists generally judged his 2009-10 stimulus program to have helped, but to have been insufficient to overcome the deep downturn.
While the details, date and venue of Mr. Obama’s speech remain to be finalized, the president throughout his bus tour hinted at his approach for simultaneously stimulating the economy while reducing projected deficits through spending cuts and revenue increases to take effect once the economy recovers.
In Minnesota on Monday, Mr. Obama said he would propose “a very specific plan to boost the economy, to create jobs, and to control our deficit.
“And my attitude is, get it done,” he contined. “And if they don’t get it done, then we’ll be running against a Congress that’s not doing anything for the American people, and the choice will be very stark and will be very clear.”
To sustain the wobbly recovery, Mr. Obama has called for extending for another year a cut in employees’ payroll tax and unemployment compensation for those out of work longer than six months. He has also proposed an infrastructure bank to leverage public and private money for roads, bridges, schools and other public projects, renewed tax write-offs for businesses’ capital investments, an overhaul of patent law to spur innovation and approval of trade pacts to promote jobs in export industries.
This week, Mr. Obama suggested he also would ask Congress to provide aid to financially struggling states and cities to keep teachers on the job — a move many Democrats and local officials have been pleading for.
“I personally believe that one of the most effective ways that we could help the economy is making sure that we’re not seeing more teacher layoffs,” he said, to applause.
Aides say Mr. Obama is also considering expanding payroll-tax relief to employers and a tax credit for new hires. Since an infrastructure bank would take time to start up, he also will propose other ways to encourage construction more quickly, an aide said.
“When interest rates are low, contractors are begging for work, construction workers are lining up to find jobs, let’s rebuild America,” he said this week.
Mark Landler contributed reporting from Atkinson, Ill.
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