Office of Management and Budget Director Jacob Lew says despite partisan rhetoric in President Barack Obama’s Wednesday deficit speech, and the reaction of congressmen from both sides of the aisle, bipartisan agreement can be forged on a 2012 federal budget and the nation’s debt. Lew Wednesday also told CNN’s John King, the Democrats and GOP have recently shown they can cooperate, though “this is a much bigger challenge.”
“In December, we worked together to do quite a few pieces of important legislation, including a tax bill that nobody thought we'd be able to agree on,” Lew said. “Just these last two weeks, we've been able to work together to cut $38.5 billion from spending in the current year.
“So I think our track record of finding a way to work together is actually better than people give it credit for,” he continued. “This is a much bigger challenge, and I think that if we look to the next several months, we do have to be realistic.”
King noted Obama proposed if the debt is not reduced to a certain percentage of the economy by 2014 it automatically triggers across-the-board spending cuts. He asked Lew whether the president would sign on to a debt fail-safe if he couldn’t get the GOP to agree to tax increases, which Republicans vehemently oppose.
“Well, just to be clear, what he proposed was an across the board mechanism that would cut spending and raise revenue — so it was covering both sides of the equation,” Lew replied. “And I think it's very important that whatever mechanism we put out there should be even-handed, because the idea of these kinds of triggers is not that they should take effect — but that the policy process should make decisions so that they don't need to take effect.
“And it's very important for everyone to feel that there's a consequence to failure to act — I think it's important for the financial markets,” he said. “It's important for us, staying on a path of meeting our targets, for there to be a fail-safe. But the fail-safe is not Plan A — the fail-safe is plan B.”
Lew, however, added that Obama was very clear he would not extend the Bush tax cuts.
“I think if you look at December, December was a very particular point in time when we were just at the very beginning of a recovery and the risk of a tax increase in January was something that could have set us backwards,” he said. “It could have put us back into a recession. We're now talking about several years into a recovery and we're not going to be in the same situation.”
King turned Lew’s attention to Social Security, noting Republican senators said a starting point would be raising the retirement age to 70 as part of a package that would put the senior citizen’s entitlement on firmer financial footing.
“I think one has to start the discussion about Social Security and understanding that it's not the driver of the deficit we're facing today,” Lew said. “But it is a very important problem, and it's an important problem because we have an obligation to make sure that Social Security is on sound financial footing for the next 75 years — not just for the next five or 10 years.”
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