Obama stands his ground on fiscal debates

WASHINGTON (AP) - President Barack Obama devoted one word - "deficit" - to the issue that brought Washington to the brink of fiscal crises time and again during his first term.

But it was the paragraph that followed in his inaugural address that foreshadowed what's to come - more hard bargaining and more last-minute deals driven by Obama's own conviction that he now wields an upper hand.

"We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future," he said. "The commitments we make to each other - through Medicare, and Medicaid, and Social Security - these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great."

This was the language of his re-election campaign.

And while his speech contained no reference to either political party, his pointed rejection of "a nation of takers" was an implicit reminder of Mitt Romney's infelicitous declaration that Obama's support came from the 47 percent of American voters "who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it."

In keeping with the objective of inaugural addresses, Obama chose to draw attention to the aspirations he hopes will define him rather than the conflicts that have characterized his relations with a divided Congress. He conceded that "outworn programs are inadequate to the needs of our time," but forged ahead with a call for training more math and science teachers, for building roads and even for funding more research labs.

If there was a way to reconcile such spending with demands to stabilize the nation's debt, he didn't mention it.

"Inaugural addresses are intended for the ages, not for a particular moment," said Matt Bennett, a former aide to Al Gore and a vice president of the Democratic-leaning group Third Way. "We will have to wait for the State of the Union, which is addressed directly to Congress, for a clearer sense of what he wants to do in the near-term and how he wants to get it done."

Obama's State of the Union address is scheduled for Feb. 12.

Obama and his aides approached the inaugural speech with a belief that the president had replenished his political strength with his re-election and with his end-of-year deal with Republicans that raised upper-income tax rates on some of the wealthiest Americans.

What's more, Obama delivered the speech as House Republicans were backing off earlier threats to withhold an extension of the nation's borrowing limit if not accompanied by sharp reductions in government spending. Instead, House leaders plan a vote Wednesday to raise the government debt ceiling through May 18 to avert a first-ever default on U.S. obligations.

That retreat, welcomed by the White House, takes the biggest potential crisis off the immediate horizon. But Obama and congressional Republicans still face two other fiscal deadlines: March 1, when steep automatic spending cuts in defense and domestic programs are scheduled to kick in, and March 27, when the current authority to keep government operating runs out. And then, on May 18, another debt limit crisis will loom.

"It's a matter of how you interpret it," said Jared Bernstein, the former chief economist for Vice President Joe Biden. "If you believe the Republicans will make the debt ceiling crisis a quarterly event, then this is a bad outcome. The White House playbook is that there are now enough Republican grownups in the room they can hammer out deals."

House Speaker John Boehner, R-Ohio, set a hopeful tone, declaring that the inaugural was a chance to "renew the old appeal to better angels." Sen. Mitch McConnell of Kentucky, the Senate's Republican leader, referred to the "transcendent challenge of unsustainable federal spending and debt. Republicans are eager to work with the president on achieving this common goal, and we firmly believe that divided government provides the perfect opportunity to do so."

During negotiations last month aimed at avoiding a combination of spending cuts and tax increases, Obama presented Boehner with a proposal that would have reduced spending on Medicare and other entitlement programs by $400 billion; reduced non-entitlement programs by $200 billion over 10 years; and lowered cost-of-living increases for Social Security recipients and other beneficiaries of government programs.

But Obama also wanted some increased spending and still wants more tax revenue through changes in the tax code that would force the rich to pay more, proposals Republicans reject.

Even an ally like Bernstein pointed out that when it comes to spending outside of defense and entitlements, Obama has an incompatible goal of reducing the budget as a share of the economy to the lowest levels since President Dwight Eisenhower's administration.

"It is very hard for me to square those tight budget constraints on the non-defense discretionary side of the budget and many of the aspirations I heard today," Bernstein said. "That said, I think they are exactly the right aspirations."

And there was little about finding common ground in Obama's speech.

"We cannot mistake absolutism for principle, or substitute spectacle for politics, or treat name-calling as reasoned debate," he said.

It was not meant as a self-critique.