Obama calls for end to funding crises in State of the Union

Tools

In a State of the Union heavy on domestic issues, government spending and the prospect of sequestration were among the first President Obama tackled during his hour-long speech.

"The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next," he said. The federal government has faced the prospect of shutdown due to lack of appropriations or the possibility of not paying its bills due to hitting the debt ceiling in periodic crises over the past 2 years.

Sequestration, originally set to take effect in January following the November 2011 failure of a joint congressional committee to settle on a $1.5 trillion deficit reduction plan, is now set to exact automatic cuts of $85 billion equally divided between defense and nondefense spending in March. That would be "a really bad idea" that would "certainly slow our recovery and cost us hundreds of thousands of jobs," Obama said.

Obama dismissed proposals to protect defense spending from sequestration by making up the difference through greater cuts to nondefense spending. "That idea is even worse," he said.

Additional action is needed on deficit reduction, Obama said, proposing a combination of Medicare caregiver payment reform, greater co-pays by wealthy retirees and a reduction in tax breaks to pharmaceutical companies that collectively would add up to the same amount over a decade "as the reforms proposed by the bipartisan Simpson-Bowles commission," referring to a deficit reduction commission chartered by Obama in 2010.

Additional deficit reduction should be obtained by tax revenue increases that would be achieved "by getting rid of tax loopholes and deductions for the well-off and well-connected," Obama said.

In addition, Congress should agree to keep the "government open, pay our bills on time, and always uphold the full faith and credit of the United States of America," Obama exhorted.

The president approved in February a bill that suspends the debt ceiling through May 18. Uncertainty in 2011 about whether Congress would raise the debt ceiling resulted in Standard & Poor's downgrading of America's credit rating and at least $1.3 billion in additional borrowing costs, according to the Government Accountability Office. The federal government is also operating on a continuing resolution that expires March 28, mid-way through the federal fiscal year.

"But let's be clear: Deficit reduction alone is not an economic plan," Obama said, going on to propose measures he said would be deficit neutral but create new jobs. He also proposed a "Partnership to Rebuild America," an effort to attract private capital for upgrading transportation and energy infrastructure and for education.

Congressional Republicans were quick to reiterate their opposition to revenue increases. "The idea that more taxes and more government spending is the best way to help hardworking middle class taxpayers--that's an old idea that's failed every time it's been tried," said Sen. Marco Rubio (R-Fla.), who gave the GOP response speech.

Obama also called for action on climate change, noting that the 12 hottest years on record have all come during the past 15, while noting that the extreme weather of the recent past--storms, drought, wildfires occurring in short order from each other--are not coincidental. Should Congress not pass a "market-based solution to climate change," Obama said he would issue executive orders.

For more:
- read the 2013 State of the Union address

Related Articles:
CBO: Federal deficit to drop below $1T if law goes unchanged
Debt ceiling suspension bill heads to the White House
Government support of innovation and technology guide inaugural agenda