Obama speech may spur fight over budget cuts

President Barack Obama's State of the Union address on Tuesday is likely to ignite a clash with Republicans over the federal deficit and the pace of budget cuts, an issue that may dominate the US political debate this year.

The No. 2 Republican in the House of Representatives, Eric Cantor, said on Sunday his party would demand "serious spending cuts" in an array of federal programs.

Obama has signaled he will call for efforts to tackle the long-term problem of high annual US deficits and surging debt in his nationally televised annual address at 9 p.m. Tuesday (0200 GMT Wednesday) but he and his advisers also want to calibrate the pace of the fiscal pullback.
 
Obama plans to emphasize the need for US global competitiveness in the speech and views investment in education and infrastructure as crucial to that effort. That goal may be at odds with Republican calls to cut spending now.
 
The State of the Union address, which Obama will deliver to a joint session of Congress, is a roadmap to the president's policy priorities for the coming year.

In a preview of the address, Obama told supporters in a weekend video message the United States is going to have to "out-innovate," "out-compete" and "out-educate" other nations.

He did not spell out specific initiatives or budget plans. But he and his Democratic allies are wary of Republican calls for immediate, large cuts in domestic spending amid fears that could stifle the still-fragile economic recovery and jeopardize hopes of reducing the 9.4 percent unemployment rate.

Obama has specifically vowed to defend education programs from major cuts.
 
FAULTED ON THE ECONOMY

Obama suffered what he called a "shellacking" in November when voters, dissatisfied with his handling of the economy, delivered big gains to Republicans, who captured the House of Representatives and increased their numbers in the Senate.

Concern over the $1.3 trillion annual budget deficit contributed to some of the Republican victories.

The president's poll numbers rebounded above 50 percent in the aftermath of a tax-cut deal he reached with Republicans.

Tuesday's speech is a chance for him to try to position himself in the political center as he lays the groundwork for his re-election bid in 2012. The speech will be followed by the release of his annual budget sometime in the week of Feb. 13.

US Senate Minority Leader Mitch McConnell, a Republican, told "Fox News Sunday" he hoped Obama's "pivot to the center" would amount to more than rhetoric.

Cantor told NBC's "Meet the Press" program Republicans would balk at raising the ceiling on the nation's debt without aggressive spending cuts and repeated a call to shrink the federal budget to its 2008 level.

"Republicans are not going to vote for this increase in the debt limit unless there are serious spending cuts and reforms," he said. "We know there are hundreds of programs that are going to need to be cut."

The Obama administration has said that failing to raise the debt limit of just over $14 trillion would cause the federal government to default on its debt and would be "catastrophic." The limit could be reached by March 31 or as late as mid-May.

Obama has overhauled his top tier of advisers, recruiting centrist Democrats who served in President Bill Clinton's administration, including new top economic adviser Gene Sperling and White House chief of staff William Daley.
 
MORE BUSINESS FRIENDLY

Seeking to project a more business-friendly image, he tapped General Electric Co. <GE.N> chief executive Jeffrey Immelt on Friday to head an outside panel on the economy.

A new push on free trade is among the bipartisan initiatives Obama is likely to discuss in his speech.
 
An assassination attempt on lawmaker Gabrielle Giffords in Tucson temporarily toned down disputes that were heating up between Democrats and Republicans over spending and a Republican vow to overturn Obama's healthcare law.

The political fault-lines are beginning to re-emerge but both sides appear to be striving for a more elevated tone.

Several lawmakers, including Senator John McCain, Obama's 2008 presidential rival, have vowed to mix up a State of the Union seating pattern that usually has Democrats on one side of the aisle and Republicans on the other.
"Look, this whole thing is a good idea. I think it's been a bit overblown, but the fact is it's a good thing to do. Why not?" McCain said on CBS' Face the Nation.

McCain, who praised Obama for a speech he delivered on the shootings in Tucson, said he believed the president had "learned a lot in the last two years as any president does. He is a very intelligent man."

When it comes to the issue of long-term deficits, it was still unclear whether Obama would use the State of the Union to embrace the recommendations delivered by his fiscal panel late last year that called for reining in future spending on entitlement programs like Social Security and Medicare, overhauling the tax code and other changes.

McCain, an Arizona Republican, said he sees room for common ground on the effort to curb the spiraling federal debt.

"We've got to take on some of the sacred cows," he said. "Agriculture subsidies are outrageous today. Ethanol is a joke. And it's a multibillion dollar spending -- all ag subsidies, sugar subsidies, all these things, they have to be examined.”

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