Setting a Budget Trap for Republicans

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by Karl Rove,

from The Wall Street Journal,

Obama is baiting the GOP to shut down the government in the fall.

Sometimes politicians, like magicians, use distraction. Take President Obama’s latest pivot to the economy, which began with last week’s speech in Illinois and concluded on Tuesday at an Amazon facility in Tennessee.

The pivot isn’t about the economy. It’s a setup for two budget battles with Congress this fall.

The first will be about funding the federal government for the fiscal year that begins Oct. 1. Mr. Obama proposed the sequester, signed the July 2011 budget agreement with its hard caps on discretionary spending, and threatened to veto any attempt to repeal or mitigate it. Nevertheless, last week he attacked the sequester as “a meat clever” that “cost jobs” and later told the New York Times Sunday that he’s worried about “the drop-off in government spending.”

Mr. Obama and Senate Democrats want to spend $1.058 trillion in discretionary outlays next fiscal year—$91 billion more than allowed under the 2011 agreement. Republicans want to hold Mr. Obama to the $967 billion ceiling on discretionary spending in the coming fiscal year, a ceiling to which he agreed.

Spending disputes almost always work to the advantage of Republicans, since Americans believe there’s plenty of waste in Washington. For example, a Feb. 18 Pew Research Center/USA Today poll found 54% felt that to reduce the deficit, the president and Congress should focus “mostly on spending cuts.” Only 16% said the emphasis should be “mostly on tax increases.” This was shortly after the Obama administration’s dire (and false) warnings about the effects of the sequester on the economy.

The second battle will be over the debt ceiling—government’s ability to borrow—that the Treasury Department says must be raised this fall, probably by November. Mr. Obama cautioned in his weekly address on Saturday against “threatening to default on the bills this country has already racked up.”

Burnishing his credentials as a deficit hawk, Mr. Obama also claimed in his July 24 speech at Knox College in Galesburg, Ill., that he’s “cut the deficit by nearly half as a share of the economy.” According to the Office of Management and Budget, the annual deficit has indeed fallen to 6% of GDP this fiscal year from 10.1% during Mr. Obama’s first fiscal year.

But the deficit is still a larger share of the economy than in 62 of the last 68 years since World War II. And the Congressional Budget Office says deficits will bottom out in fiscal year 2015 and begin climbing again. All this means Republicans will insist on further spending restraint, especially on entitlements, as part of any debt-ceiling measure.

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