WASHINGTON – Treasury Secretary Jacob Lew told Congress on Thursday that the Obama administration is optimistic about a budget deal, but he urged lawmakers to consider concessions already made in President Barack Obama’s $3.8 trillion spending request.
In testimony before House and Senate committees, Lew said that the budget request put forward Wednesday represents a balanced approach. It claims $1.8 trillion in deficit reduction over the next decade, although $1.2 trillion of that would be devoted to reversing automatic cuts that were part of a 2011 budget deal.
The budget the administration unveiled on Wednesday contains spending curbs on Social Security and Medicare and new taxes totalling close to $1 trillion over 10 years.
“These proposals are based on the conviction that an agreement is within our reach,” Lew said during a morning hearing before the House Ways and Means Committee, his first congressional appearance since becoming Treasury secretary in February. Lew testified in the afternoon to the Senate Finance Committee.
At both hearings, Republicans criticized the administration’s budget, saying it did not seek enough cost savings from Social Security and Medicare.
“The president’s program takes only baby steps in reforming our entitlement programs,” Sen. Orrin Hatch, R-Utah, told Lew. “Claiming that this budget is an act of courage on entitlements … is a claim. It is not reality.”
Democrats also voiced objections to the budget’s proposed changes to Social Security. However, their complaints focused on a plan that would tie the annual cost-of-living adjustments to a different measure of inflation. They said that would limit benefits.
The Obama budget achieves $130 billion in savings by using this “chained CPI” measure of inflation to making cost of living adjustments for Social Security and other government benefit programs.
Senate Finance Committee Chairman Max Baucus, D-Mont., said he would have preferred that the administration achieve savings by raising Social Security payroll taxes on upper-income workers.
Lew objected to Hatch’s characterization that the cost-of-living proposal was minor concession.
“It is a red line that a lot of Democrats never wanted us to cross,” he said, adding that Obama had offered the proposal during negotiations with Speaker John Boehner in December. By including it in the budget, the administration hoped to demonstrate its commitment to reaching a deal.
But Lew made clear in both hearings that Obama will back cuts in entitlement programs only as part of a bigger deal that includes tax increases.
Lew declined to say when the government might face a default on the national debt if it does not raise the borrowing limit later this year. In January, Congress suspended the borrowing limit until May 18.
Lew can employ a series of bookkeeping moves to allow the government to keep paying its bills a little longer. Most economists expect Lew can delay a default until around August.
Some Republicans have suggested that Lew pay interest on the national debt and other priorities such as monthly Social Security benefits, but delay other payments to buy more time to resolve the debt issue. Lew rejected that suggestion.
“To introduce the notion that there are some bills we will pay and some bills we will not pay would be a mistake,” Lew said. He said such an effort would put into jeopardy America’s standing as a solid credit risk.
Lew told lawmakers that Obama wants a deal on the budget. He mentioned that he first testified before the Ways and Means Committee in 1973 and that over the past four decades he can recall a number of bipartisan agreements reached on critical issues.
“The debate we are engaged in is very important,” Lew told lawmakers. “I believe we can find common ground.”