Obama’s State of Union Speech Suggests Cautious FY’13 Budget

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–President Obama Calls For Quick Passage of Payroll Tax-Cut Extension
–Obama Says He Would Like The Right Kind of Grand Deal on Deficit
–Analysts Don’t Expect President To Offer Much In Budget on Feb. 13

By John Shaw

WASHINGTON (MNI) – In his State of the Union address Tuesday night,
President Obama indicated that he’s still open to some kind of grand
bargain to reduce the budget deficit, but he gave little indication that
this will be a high priority in the coming year.

The president’s speech seemed to be a clear attempt to de-emphasize
the budget deficit in the coming year, hoping that a strengthening
American economy and a fierce Republican presidential primary will allow
him to win re-election — and perhaps return to consequential fiscal
negotiations in 2013.

In his remarks Tuesday evening, Obama said relatively little about
fiscal policy. Congress’s “most immediate priority,” he said, is to
reach an agreement to extend the payroll tax cut which expires at the
end of February.

“There are plenty of ways to get this done. So let’s agree here,
right now: No side issues. No drama. Pass the payroll tax cut without
delay,” Obama said.

The House-Senate talks on a payroll tax-cut extension package began
several hours before Obama spoke and while there were strong calls for
bipartisan cooperation on the issue, tough battles are surely ahead as
the final package takes shape.

The president did say he is still willing to negotiate a large
budget deal with congressional Republicans, but there was no urgency in
his remarks and no specific call for a fresh round of negotiations.

“I’m prepared to make more reforms that rein in the long-term costs
of Medicare and Medicaid and strengthen Social Security, as long as
those programs remain a guarantee of security for seniors,” he said.

“But in return, we need to change our tax code so that people like
me, and an awful lot of members of Congress, pay our fair share of
taxes. Tax reform should follow the Buffet rule: if you make more than
$1 million a year, you should not pay less than 30% in taxes,” he added.

Obama’s speech took an unmistakable swipe at congressional
Republicans for their hard-line stance on the debt ceiling last year.

“The greatest blow to confidence in our economy last year didn’t
come from event beyond our control. It came from a debate in Washington
over whether the United States would pay its bills or not. Who
benefitted from that fiasco?” Obama said.

But the president did appear to take some credit for one of the
results of that negotiation when he said “together we agreed to cut the
deficit by than $2 trillion.”

Obama is expected to submit his fiscal year 2013 budget on Feb. 13
and there is little reason to expect the budget will offer surprising
initiatives to tackle the deficit.

House Ways and Means Committee Chairman Dave Camp chided the
president for giving “short shrift” to Medicare and Social Security
reform in his speech.

House Budget Committee Chairman Paul Ryan said the president
“missed an opportunity to lead” the nation by declining to address
serious fiscal challenges.

Obama, he said, “offered more empty promises and recycled the same
failed policies.”

** Market News International Washington Bureau: (202) 371-2121 **

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