Obama, GOP Prepare to Clash over Spending

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In his State of the Union address Tuesday, President Obama is expected to call for deficit reduction and government reform paired with investments in areas like innovation, infrastructure and education. Meanwhile, Republicans say they are prepared to resist any new government spending, setting up a critical debate between congressional Republicans and the White House over how to best revive the economy and nurture its long-term growth.

"My principal focus, my number one focus, is going be making sure that we are competitive, that we are growing, and we are creating jobs not just now but well into the future," Mr. Obama said in a video message e-mailed to his supporters this weekend.

On "Fox News Sunday," Senate Minority Leader Mitch McConnell dismissed the notion of government investments. "With all due respect to our Democratic friends, any time they want to spend, they call it investment, so I think you will hear the president talk about investing a lot Tuesday night," he said.

McConnell said the GOP would take a look at the president's recommendations for investments, but he added, "This is not a time to be looking at pumping up government spending in very many areas."

Republicans in the House on Tuesday will hold a vote on a resolution that is likely to highlight the partisan division: The resolution would require a cut in discretionary, non-security spending to bring it down to 2008 levels -- a move that would mean slashing 30 percent off of most agency budgets this fiscal year.

"We are intent on making sure, on an annualized basis, that we are hitting the '08 levels or below," House Majority Leader Eric Cantor said on NBC's "Meet the Press" yesterday. "And so every member will have the chance to come to the floor, to talk about whether they believe that '08 levels are enough to cut, because some members actually want to see us do more. And I agree, we ought to look in every way possible to reduce spending as much as possible."

Cantor said House Republicans will have "three bites at the apple" to insist on spending cuts: Their resolution to reduce the federal budget, a vote this spring to fund government operations past March 4 and a vote anticipated this spring to raise the debt ceiling. When it comes to what programs to cut, Cantor said, "Every dollar should be on the table."

On CBS' "Face the Nation," Republican Sen. John McCain of Arizona said Washington has "to take on some of the sacred cows" to get the deficit and debt under control. He called agricultural subsidies "outrageous," ethanol subsidies "a joke," and the Post Office "a model of inefficiency."

"And then we have to go after entitlements," he told "Face the Nation" host Bob Schieffer. "You and I could write the solution to Social Security problems on the back of an envelope. What we have to do is sit down together and go through those remedies. Medicare is going to be much more difficult. But we have to go after the sacred cows and we have to go after entitlements."

Liberal activists and pundits have been up in arms over the possibility that Mr. Obama could endorse changes to Social Security in his State of the Union address such as an increase in the retirement age.

The Wall Street Journal reports that White House officials "have assured Democratic lawmakers that the president will not explicitly call for cuts in Social Security benefits, though he will say changes are needed to put the program on a solid fiscal footing. At the same time, Mr. Obama will call on both parties to be prepared to put everything on the table. That means Democrats have to be ready to look at changes to Social Security, and Republicans to consider tax-code changes to increase revenue."

Meanwhile, the Washington Post reports that Republicans are ready to concede on issues such as eliminating some tax deductions. "Despite their opposition to raising taxes, Republicans have conceded some cherished [tax] deductions, such as the one that allows homeowners to deduct the interest on their mortgages, may have to go," Shailagh Murray and Lori Montgomery report.

CBS News political analyst John Dickerson said on "The Early Show" that the prospect of cutting such a popular tax break is "enough to make you choke on your coffee this early in the morning."

"But what will probably happen, if such a deal were ever to come about, is that it would probably be for houses that were, say, over $1 million," he said. "And also, there would be a tradeoff, so that people would no longer be able to deduct all of their mortgage interest, but their rate on their income would go down, so there would be some kind of tradeoff in order for such a thing to pass."

As for the State of the Union, Dickerson said the president will not use the speech to get into specifics.

"These State of the Union addresses can get boring and turn into long laundry lists, and the White House sees this one a little bit differently," he said. "It's going to be more thematic, as sort of an opening argument for the next two years, rather than a long list of specifics from the president."

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