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Budget to constrain Obama

Dour economy likely means few new programs

– Even if President Obama succeeds in getting Republicans to agree to tax hikes on the wealthy as part of a fiscal cliff deal, the country’s grim budget realities will still cast a long shadow – limiting his ambitions as he begins plotting a second-term agenda.

White House aides are signaling to allies that any new money from taxes would be used almost entirely for deficit reduction – not for ambitious, new spending programs or government expansions.

Where Obama entered office four years ago planning to seize a moment of economic crisis as an opportunity for transformational policies such as the $800 billion stimulus and his health care overhaul, he begins his second four years with few, if any, similarly expansive or costly prospects.

Instead, any new spending programs will, by necessity, be small and narrow in scope: repairs to roads and bridges, airport renovations and other infrastructure upgrades, for example, or modest grants to help blighted city neighborhoods.

Allies expect Obama to harness the combined political capital of his re-election and the outcome of the tax fight for an aggressive push to legalize millions of illegal immigrants in what could be a signature domestic achievement.

But beyond that, the second-term agenda remains shrouded in uncertainty, with questions about whether he would pursue other politically charged issues such as climate change or voting rights.

How high Obama can aim will depend at least in part on the details of whatever deal he manages to strike in the coming weeks with House Speaker John A. Boehner, R-Ohio.

Democrats say breaking GOP orthodoxy on taxes would be a game-changing moment, weakening the tea party movement’s two-year stranglehold on Republican leaders and paving the way for future deals.

“A good agreement could provide important momentum for the president to accomplish other items on his agenda, like immigration reform, like some energy and infrastructure initiatives,” said Rep. Chris Van Hollen, D-Md., senior Democrat on the House Budget Committee. “The question is, what does a ‘good agreement’ mean?”

Sen. Richard Durbin, D-Ill., said Obama’s potential success over the next four years also depends on the president’s ability in the current talks to neutralize GOP threats to use votes on increasing the country’s borrowing limit to force additional spending cuts.

One House GOP leadership aide said Obama would be unwise “if he comes in here and poisons the well by trying to break as many Republicans as he can. By nature of how politics works, you’re going to see a lot less cooperation going forward.”

No matter what happens, according to people close to the White House, Obama is likely to find himself more on defense during his second four years in the Oval Office, choosing what programs to spare from cuts rather than which ones to create or expand.

That’s because the broad framework for spending was already essentially set last year, when Obama and Republican leaders agreed to pair an increase in the debt limit with across-the-board cuts to the Pentagon and other federal agencies valued at $1 trillion over the next decade.

Those cuts and other policies being discussed by the White House and Republicans would just barely satisfy the approximately $4 trillion in deficit reduction over the next decade both sides believe is necessary.

“It’s clear there is a restraint that’s already built into the deal of 2011,” said John Podesta, chairman of the White House-aligned Center for American Progress.

“He’s going to have to find more savings to double up on his investments on his priorities,” Podesta added. “The problem is, if he doesn’t get the higher revenues from the current negotiations, they’ll be even further pressured to cut back even further.”

Top Obama aides have shown flashes of frustration that the budget situation will not give them much freedom to operate in the future on programs they see as critical, particularly if they fail to move Republicans further on raising revenue.

“Those numbers are tight now. They are very tight,” said Gene B. Sperling, Obama’s top economics adviser, during a speech last week at the Brookings Institution.

“At some point, you just start trading off between whether when you want a nutrition program or you want biomedical research and you want early childhood.

“And that’s not a good place to be.”