To help his reelection bid, Obama needs entitlement reform now

President Obama kicked off his 2012 reelection campaign today just when Washington is in the middle of a heated budget debate. Congress and the White House may now be tempted to turn that debate into issues for voters to decide in another 20 months rather than settle them sooner.

That would be a mistake.

Washington can’t afford to dawdle on its spending plans. Since the fiscal year began last October, Congress still has not passed a federal budget, surviving instead on interim funding agreements. The latest stop-gap measure is set to expire at midnight on Friday April 8.

Now, a deal for the rest of the fiscal year is in reach. Lawmakers should seal it and move on to the much more important spending decisions for next year and beyond.

These decisions may appear to be about dollars and cents, but they are really about the role of government in encouraging opportunity and economic growth while at the same time looking out for the nation’s most vulnerable citizens.

This sounds like a question for 2012, and undoubtedly it will be. But it was also a big issue in the 2010 elections, and that means lawmakers can start making hard decisions now.

Otherwise, others might make the decisions for them. As the debt debacle in Europe shows, the financial markets are unpredictable. But when they pounce, their attack is fierce, forcing up interest rates – a damper on economic growth. With America’s swelling deficits and debt, the country is increasingly vulnerable to just such a scenario.

It will take time and compromise for Republicans and Democrats to agree on a deficit reduction plan. If they wait until a presidential winner and new Congress to start work in January 2013, that may be too late.

Various budget plans are now starting to take shape. On Tuesday, the head of the House Budget Committee, Republican Paul Ryan, is expected to unveil a blueprint for 2012 that would cut more than $4 trillion over 10 years. It would do that in part by fundamentally restructuring expensive entitlement programs such as Medicare for seniors and Medicaid for the poor. Spiraling health costs and demographic changes are exploding the costs of these programs.

The plan reportedly lowers income and business tax rates, converts Medicaid into block grants for the states, and turns Medicare into a voucher system for seniors to buy private health insurance (those 55 years and older would not be affected by the change).

The White House, which presented its 2012 budget proposal in February, increases the federal debt by $7 trillion over 10 years and avoids an overhaul of entitlements. Instead, it freezes some discretionary spending for five years, spends more on infrastructure and education to make America more competitive, cuts defense spending and ends subsidies for oil and gas industries and eliminates some tax benefits for upper-income individuals.

Meanwhile, in the other chamber of Congress, a bipartisan “gang of six” senators is looking at ways to cut the deficit, including entitlement reform. Their work is based on President Obama’s bipartisan commission on deficit and debt reduction. In December, the commission issued a report that reduced the deficit by $4 trillion over 10 years.

Unfortunately, there is talk on both sides about using the time between now and November 2012 to merely debate – and demagogue – proposals to reduce spending on such big-ticket items as entitlements.

It’s true, Medicare, Medicaid, and Social Security were not focused on as campaign issues in 2010. But voters sent a clear message that they want smaller government and reduced spending. Global finance markets have, too. Indeed, the budget deficit has risen as a top economic concern for people in recent months.

If Congress tackles this now, both parties can share the blame – and responsibility – and take the country through a difficult but necessary readjustment. As the first out of the presidential starting gate, Mr. Obama must encourage his party toward an even-handed and calm discussion about deficit reduction and entitlement reform, and then take action. Republicans leaders must do likewise.

As the nation learned from health-care reform, one-party solutions to changes this big don’t go down well.