Health cuts loom in new budget fights

Discovery Communications Wellness Center medical technician Charline Faison takes down patient medical information during an appointment at the clinic in the Discovery Communications headquarters building in Silver Spring, Maryland December 3, 2009.

WASHINGTON (Reuters) - After a narrow escape from a potentially damaging government shutdown, even bigger budget fights lie ahead for President Barack Obama and leaders from both parties in the U.S. Congress.

Senior White House adviser David Plouffe told CNN that Obama's plan will explore savings in defense spending and the government-run Medicare and Medicaid health programs for the elderly and poor in an effort to reduce the $1.4 trillion annual deficit.

Obama will offer a long-term plan for deficit reduction on Wednesday as the White House and Congress begin to pivot to looming fights on the 2012 fiscal year budget and on raising the $14.3 trillion limit on government borrowing authority.

Those conflicts are likely to dominate the political agenda for the coming months and echo into Obama's 2012 re-election race, overshadowing Friday's 11th-hour deal to cut $38 billion in spending for the final six months of this fiscal year.

"The spending deal that was cut this week is only the beginning. This is the first bite of the apple," said Representative Eric Cantor, the No. 2 Republican in the U.S. House of Representatives.

Republicans, who made big gains in November's election with promises to cut spending and rein in government, are skeptical of Obama's sincerity on deficit reduction.

"For the last two months we've had to bring this president kicking and screaming to the table to cut spending," Cantor said on Fox News. "In my opinion, it's really hard to believe what this White House and the president is saying."

The plan also will revisit the issue of tax increases for the wealthy and spell out specific deficit-reduction targets and a timeline, he said.

"He's going to be clear about the type of deficit reduction we need in terms of dollar amounts, over what period of years," Plouffe told CNN.

The unveiling of Obama's plan follows a deal on spending cuts for the rest of this fiscal year struck with barely an hour to spare before Friday's midnight deadline. It stopped a shutdown the White House feared would hinder the economic recovery and idle more than 800,000 federal workers.

BOTH SIDES UNHAPPY

The Senate and House are expected to approve that agreement this week, although lawmakers on both sides of the political aisle have criticized it.

Fiscal conservatives aligned with the Tea Party pressured House Speaker John Boehner for even deeper cuts, while liberal Democrats fear the cuts will hurt social programs for Americans dealing with the lingering effects of a recession.

Later in the week, the House takes up the Republican 2012 budget plan proposed by Representative Paul Ryan, head of the House Budget Committee. His plan would save $6 trillion over the next decade partly by cutting Medicare and Medicaid.

"The president is not going to support a lot of what's in that plan," Plouffe said on NBC. "It may pass the House. It's not going to become law."

Republicans and Democrats also expect another tough political fight in the next few months over raising the debt ceiling.

Administration officials warn a failure to raise the debt limit could put the United States into a debt default that would risk global economic havoc, but Republicans said it must be accompanied by budget reforms or spending caps.

"There is no way that we Republicans are going to support increasing the debt limit without guaranteed steps being put in place to ensure that the spending doesn't get out of control again," Cantor said.

Plouffe said the debt limit should be beyond politics. "We should not be playing brinkmanship with the full faith and credit of the United States of America," he said.