Less than a week after job-creation figures fell short of expectations and underscored the U.S. economy’s fragility, President Barack Obama will send Congress a budget that doesn’t include the stimulus his allies say is needed and instead embraces cuts in an appeal to Republicans.
“This is not our ideal budget,” Gene Sperling, director of the White House’s National Economic Council, told Bloomberg Television. “This does reflect a compromise offer. There’s measures in here we would prefer not to take.”
Obama’s budget for fiscal 2014, set for release April 10, will propose reducing Social Security recipients’ annual cost- of-living adjustments by changing the inflation calculation, according to an outline released last week. The Medicare insurance program for the elderly would be cut by reducing payments to health-care providers and drug companies and imposing more costs on high-income beneficiaries.
While the White House hasn’t yet released specific dollar figures for the budget, administration officials said the plan puts the country on a path toward lower deficits, cutting the gap by $1.8 trillion over the next 10 years.
That suggests the federal government’s fiscal policy will continue to withdraw support from the economy next year, as it has this year, possibly further sapping growth.
The expiration of the payroll-tax cut on Dec. 31, an increase in marginal tax rates for high-income earners and automatic spending reductions, known as sequestration, will combine to depress U.S. growth this year by 1.5 percentage points, according to the Congressional Budget Office.
March payrolls grew by 88,000, less than the most- pessimistic forecast in a Bloomberg survey, after a revised 268,000 gain in February, Labor Department data released April 5 showed. While stocks have recovered from the recession, the Standard & Poor’s 500 Index last week took its biggest drop of the year.
U.S. Treasury debt remains strong amid Washington’s continued inability to enact long-term deficit controls. Ten- year note yields fell 14 basis points, or 0.14 percentage point, to 1.71% last week in New York, according to Bloomberg Bond Trader data.
Obama’s goal since 2011 has been a grand bargain with Congress on a long-term deficit-reduction plan that ends a pattern of repeated showdowns driven by budget or debt deadlines. The budget is a fresh attempt to restart talks.