Budget battle: 3 plans on the table, what now?

WASHINGTON (AP) ? First the Republican-led House approved a federal budget that's heavy on spending cuts. Then the Democratic-controlled Senate approved one that leans more toward tax increases. Then at last, President Barack Obama put out his own budget plan, two months late, coming down someplace in between.

Sounds like progress, right? Check back on that.

The competing proposals are more likely to produce just more budget gridlock.

There are kids in preschool who hadn't been born when Obama and congressional Republicans started arguing over how to make meaty cuts in the federal budget deficit and put the country on a more sustainable fiscal track. And those kids could be well into elementary school with the two sides still in search of a "grand bargain" that cuts government spending in a big way for decades to come.

Still, the president's proposed budget for the year that starts Oct. 1 could provide a framework for talks to find a mix of spending cuts and tax increases that members of Congress feel they can stomach ? and still get re-elected.

If something truly grand is out of reach, might a so-so bargain be doable?

A primer on the latest fiscal skirmishes and the broader dynamics in Washington's long-running budget battle:

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2,420 pages.

There's something for everyone to hate in Obama's spending plan ? and some deficit hawks think that's a good sign.

The president's budget is aimed at reducing future deficits by $1.8 trillion over the next decade through a mix of modest spending cuts and $1 trillion in higher taxes. It replaces $1.2 trillion in previously approved across-the-board cuts and includes reductions in the growth of programs that politicians are typically loath to mess with ? programs like Social Security and Medicare.

It's a far cry from the good old days when budgets were feel-good documents larded up with tax cuts and pricey new programs.

Obama's budget does contain a few new initiatives: money to fix highways, bridges and transit systems, financing for high-speed rail projects and preschool for all 4-year-olds among them. The federal tax on cigarettes would nearly double to $1.95 per pack to help pay for the new stuff.

But overall, the focus is on making do with less.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, says the fact that the president's plan makes so many people squirm is evidence that it's a serious effort to do something tough.

"The nature of fiscally responsible reforms is that they are filled with things that everyone is going to hate," she says. "They're hard."

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Ready, aim ...

Reaction to Obama's budget laid bare the same partisan differences that have prevented legislators and the president from reaching a big budget deal all along. Republicans are adamantly against the new tax revenue in the president's proposed budget and say they want to rein in spending on entitlement programs; liberal Democrats are irked that the president's budget would make nicks in Social Security and Medicare and insist that tax increases need to be a bigger part of the mix.

Those differences aren't going anywhere ? and will only become more pronounced as the 2014 elections near.

Even the president doesn't appear to be under any illusion that a large fiscal deal is imminent ? or even within distant reach.

"He did indicate a desire to work with us," said Sen. Orrin Hatch of Utah, one of the 12 Republican senators who had dinner with Obama at the White House on the day he released his budget. "But he also indicated that it's very tough for him because of his side and their particular approach to things. He made it very clear that it's going to be very difficult to bring both sides together, that he has had difficulty doing that."

There's a risk that Obama's attempt at compromise ends up being "a middle path to nowhere," in the words of Tony Fratto, a former Bush Treasury and White House official.

But there is still a chance that Obama's offer ? which keeps intact the contours of his previous "grand bargain" negotiations with House Speaker John Boehner ? could be the basis for summertime talks that actually produce something.

Republican Paul Ryan, chairman of the House Budget Committee, has said it's "the first time in this presidency" that he felt cautiously optimistic about a bipartisan budget deal.

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What now?

In theory, the next step is for congressional negotiators to get together and produce a compromise budget that draws on what the House, Senate and president have proposed.

But Republicans are refusing to appoint negotiators.

And, in fact, Congress hasn't passed a federal budget in years, although the Republican-controlled House has passed a budget in each of the past three years: Lawmakers just keep appropriating money to keep the government chugging along.

That's probably what will happen again, predicts Stan Collender, a former staffer on both the House and Senate budget committees.

As for those lofty aspirations for a "grand bargain," Collender says, "We're talking years, not months" of negotiations.

There are plenty of other big issues swirling on Capitol Hill with better odds for producing results that threaten to distract legislators.

"The danger here is that everybody will forget about the budget and turn now to immigration and guns, and we leave the budget until the next crisis hits," says Bob Bixby, executive director of the Concord Coalition, which advocates balanced budgets.

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Wait, the next crisis?

But of course.

The same budget maneuverings that already have produced debt-limit shenanigans, fiscal cliff hangings and sequester scare tactics will once again produce a deadline for increasing the federal debt limit sometime this summer.

Republicans will have to decide whether to try to extract more spending cuts from Obama and Democrats before agreeing to increase the debt limit.

That kind of bargaining brinksmanship proved unpopular in the past, though, so Republicans may not want to push it too far in the lead-up to the 2014 elections.

"Boy, that's getting to be a tired old game," says Bixby. "At some point they're going to have to deal with these problems."

Bixby's prediction: some sort of summertime "mini grand-bargain" that avoids a disruptive debt crisis, delivers a limited dose of deficit reduction and requires more work later to take a larger swipe at the budget.

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About that sequester ...

As the latest episode of the budget drama plays out, $85 billion in automatic spending cuts already are worming their way through the government and producing plenty of squawking about airport delays and other inconveniences.

The planned spending cuts are the first installment of $1.2 billion in reductions over 10 years that were part of a 2011 deal that was so awful that legislators and the president agreed to it in hopes of forcing themselves to think up something better later. They didn't.

So now federal workers are getting furlough notices, Head Start budgets are shrinking, airport security lines are longer, military air shows are being cancelled and more, thanks to the so-called sequester.

Senate Republicans and Democrats this week bickered over competing proposals to ease the impact of cutbacks to air traffic controllers that have caused flight delays for millions of travelers ? without coming up with a resolution.

Overall, though, it appears Republicans are thinking maybe those automatic cuts aren't that bad after all.

Obama's budget, if enacted, would put an end to those and future across-the-board cuts, substituting $1.8 trillion in targeted cuts and new taxes for $1.2 trillion in indiscriminate cuts that are scheduled to take effect over the next 10 years.

So, in essence, Obama wants to use a scalpel to cut more from the deficit than the sequester's meat-axe would cleave.

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Billion-dollar chains?

The details of how the government measures inflation are typically the kind of thing that only a wonk could care about.

Now it's suddenly a $230 billion question with implications for millions of retirees, veterans and taxpayers.

Obama's budget calls for using a different measure of inflation ? called the Chained Consumer Price Index ? that would tend to register lesser levels of inflation.

That, in turn, would mean smaller cost-of-living raises for recipients of Social Security payments, government pensions and veterans' benefits. It also would cost taxpayers $100 billion by pushing some people into higher tax brackets and limiting growth in tax deductions and exemptions.

The idea has been around for a long time: It was part of Obama's earlier budget offer to Boehner. But now that it's officially in the president's budget, liberal Democrats, labor leaders and advocates for the elderly are in open revolt.

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Why is this so hard?

It seems like this is a problem ripe for a solution: People agree the growing national debt needs to be reined in. Budget experts can whip up all kinds of deficit reduction concoctions. Politicians say it's time to act.

Polls provide the answer: Ask Americans whether it's more important to reduce the deficit or keep Social Security and Medicare benefits as they are, and they consistently side with protecting benefits over cutting the deficit.

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Associated Press writer Jim Kuhnhenn contributed to this report.

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Source: http://news.yahoo.com/budget-battle-3-plans-table-now-071509049.html

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