House fiscal hawks set demands for budget fight

WASHINGTON Thu Mar 19, 2009 9:54am EDT

Related Topics

WASHINGTON (Reuters) - A bloc of fiscally conservative Democrats crucial to moving U.S. President Barack Obama's budget through Congress will demand strict spending and deficit controls as part of any final budget deal.

Obama has sent Congress a $3.55 trillion budget plan and next week the House of Representatives and Senate are expected to begin work on legislation setting parameters for government spending in the 2010 fiscal year that starts on October 1.

Republicans have already staked out their opposition to parts of the big spending plan.

But conservative Democrats are another constituency that Obama must win over and the so-called Blue Dog Democrats group counts 51 members -- giving them an influential voice in how the budget debate will play out.

To control spending, the Blue Dogs will demand non-defense discretionary spending be capped at the rate of inflation and that future programs do not increase the deficit, including Obama's healthcare plan.

"We should be looking to put into our budget-writing systems some tools that will enable us to be fiscally responsible," Representative Allen Boyd, one of the group's co-chairs, told Reuters after meeting with House Democratic leaders on Wednesday.

"We want to work with the president, we really want to work on this fiscally responsibility issue because it's important that we get back to a glide path for balance," Boyd said.

Obama -- who took over as president from Republican George W. Bush on January 20, inheriting growing deficits as an economic crisis mounted -- has said he would try to shrink the deficits more.

The Obama budget outline projected a record $1.75 trillion deficit for fiscal 2009 and $1.17 trillion in 2010, falling to as low as $533 billion in 2013 before growing again. Those later deficits have sparked concern among the Blue Dogs.

"We're concerned ... with the Obama budget that we are -- according to their numbers -- maintaining $500 billion or more in deficit spending in the latter five years," Representative Stephanie Herseth Sandlin told Reuters.

"We simply won't support that, we have to close the gap between revenues and spending."

The group also plans to demand that the budget continue a temporary tax break for small businesses that permits them to write off more of their current losses against past tax years.

TIPTOEING ON CAP-AND-TRADE

Obama has proposed in his budget a sweeping overhaul of the $2.5 trillion healthcare system to rein in soaring costs and cover an estimated 46 million uninsured Americans. But the Blue Dogs said they will demand it not expand the deficit.

The president's plan included a $634 billion marker to cover some costs of expanded coverage but hopes to offset that in the long run with savings in the overall system.

"If we don't cure the healthcare problem, you don't cure the deficit problem for the long term," said Representative Charlie Melancon, another Blue Dog co-chairman.

"They (Democratic leaders), as well as the administration, have been very supportive of us," he said. "They have been very receptive to our discussions."

Obama has courted the group as one way to ensure his agenda moves through Congress.

Another particular concern among the Blue Dogs is how to proceed with Obama's controversial budget proposal for curbing greenhouse gas emissions with a system to cap and trade carbon emissions permits and using revenue from it to pay for middle class tax cuts.

There has been some debate about whether to include directions for the program in the budget that would make it easier to pass specific legislation. But the Blue Dogs have urged Obama and Democratic leaders to avoid that route and also not to allocate the revenue yet.

"There is disagreement on specifically allocating revenues under a policy that we haven't yet enacted and may be very difficult to enact in 2009 for purposes of generating revenue for a 2010 budget," Herseth Sandlin said.

The group did not weigh in on the overall cap-and-trade program.

(Editing by John O'Callaghan)

FILED UNDER: