September 9, 2011 / 7:27 PM / in 6 years

Obama jobs plan could complicate deficit panel work

WASHINGTON (Reuters) - A new deficit-reduction “super committee” in the U.S. Congress, already split over tax and spending policies, has a new worry -- how to pay for President Barack Obama’s jobs plan if lawmakers embrace it.

In promising to a joint session of Congress on Thursday that the $447 billion initiative he unveiled would not add to already bloated government budget deficits, Obama in effect raised the bar for the special committee that is struggling to find at least $1.2 trillion in savings over 10 years.

“The president is essentially tasking a committee designed to reduce the deficit to pay for yet another round of (economic) stimulus,” complained Republican Representative Jeb Hensarling, the co-chairman of the super committee that has until November 23 to try to strike a new deficit-reduction deal.

Another Republican on the super committee, Senator Rob Portman, accused Obama of “abdicating responsibility in paying for his plans, pushing it off on the deficit-reduction committee.”

But Obama said he will offer his own plan on September 19 for reducing record deficits. It is expected to amount to about $2 trillion over 10 years, enough to cover the super committee’s mandate and the cost of his proposed jobs initiative.

While many on the committee already were saying they want to go beyond their mandate of finding a minimum of $1.2 trillion in savings, congressional aides and independent analysts have assumed that goal would be hard enough to reach -- without adding on nearly a half-billion-dollars more.

The divisions are clear.

Democrats want to protect domestic social safety net programs from benefit cuts and Republicans want to lower corporate taxes and revamp the overall tax code. One Republican member of the super committee, Senator Jon Kyl, added a new wrinkle on Thursday when he threatened to quit the panel if new military spending cuts were even discussed.

Pentagon spending approaches $700 billion out of a $3.6 trillion annual U.S. budget.


Democrats shrug off the notion that their president has complicated the super committee’s work though.

“He (Obama) is within the confines of what we’ve been thinking all the time,” Representative James Clyburn told Reuters. The Democratic member of the panel said committee members always intended to go beyond the minimum required by law in savings. “It doesn’t give us a problem at all,” he said.

Another Democratic member, Representative Chris Van Hollen, said Obama’s jobs initiative could actually make the super committee’s work somewhat easier.

“The president is making a very important point here, which is the fastest and most effective way to reduce the deficit is to get people back to work, to get the economy moving again,” Van Hollen said in an interview with CBS News.

Indeed, some economists estimate that Obama’s plan to cut taxes for workers and small businesses while investing in rebuilding roads, bridges and schools would boost economic growth by 1 to 3 percentage points next year.

That could result in adding more than 1 million jobs.

And with those jobs comes additional revenues to the federal government’s coffers as the previously unemployed begin earning taxable income. That, in turn, helps lower budget deficits. And that would reduce Washington’s interest payments on its debt.

Some government economists assume that a 1 to 3 percentage point lift in economic growth could translate into a $30 billion to $90 billion in potential deficit reduction.

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