Budget battle in opening stages

President Barack Obama and members of Congress agree that cutting the federal deficit is important but what should be cut and by how much is the debate ahead as the next budget battle takes shape.

On Tuesday senior officials at the White House announced that the President had extended a previous call for a 3-year freeze on spending for domestic spending, changing it to a 5-year spending freeze.

Obama also endorsed a proposal by his Secretary of Defense Robert Gates to slow the growth of the military's budget by $78 billion over five years. The revelations came just ahead of the President's annual State of the Union Address to Congress, where he broadly outlined his agenda.

Obama outlined key spending plans for innovation, infrastructure and education. The freeze amounted to just a small portion of the budget, with many unanswered question remaining about more significant expenses.

The President was right to focus his attention on the economy and on our deficit and debt in particular, said Rep. Paul Ryan, R-WI in the Republican address to the nation following the President's speech.

As chairman of the House Budget Committee, I assure you that we want to work with the President to restrain federal spending, Ryan said.

Ryan's Roadmap

The plan has four main points, focusing on healthcare, social security, tax reform and job training.

For healthcare Ryan aims for a system that involves not greater government control, but a stronger role for consumers in a competitive marketplace.

His aims for social security aim to strengthen it and make it sustainable by phasing in reforms to those under 55 and allowing younger workers to invest some of their funds in personal retirement accounts.

In tax reform, Ryan may find some commonalities with Obama who has said he wants to simplify the tax code. Ryan offers an alternative what he sees as a complex and inefficient tax code, providing the option of a simplified mechanism that better promotes and rewards work, saving, and investment.

Ryan also aims to consolidate the nation's 49 job training programs across 8 agencies into one with a clear focus on results, transparency and accountability.

Obama's Initial Cuts

Obama acknowledged that the cuts he proposed on Tuesday were far from large, but offered a broad outline of his plans.

[M]ost of the cuts and savings I've proposed only address annual domestic spending, which represents a little more than 12 percent of our budget, Obama said.

To make further progress, we have to stop pretending that cutting this kind of spending alone will be enough. It won't, the President said.

Medicare and Medicaid - programs that help low-income people - would need to be cut further, the President said, calling those health programs the single biggest contributor to our long-term deficit.

Obama said Social Security reforms should not put at risk current retirees or people with disabilities, without cutting benefits for future generations. He also said he didn't want guaranteed retirement income to be subjected to the whims of the stock market.

A bipartisan solution was needed to strengthen Social Security for future generations, Obama said. Ryan said there was still time to address the matter properly.

If we act soon, and if we act responsibly, people in and near retirement will be protected, Ryan said.

Obama's Warning on Cuts

Obama said that there were some lawmakers who had proposed deeper cuts than he had. Obama said he was willing to eliminate whatever he thought we can honestly afford.

But let's make sure that we're not doing it on the backs of our most vulnerable citizens, Obama said.

Senate Majority Leader Harry Reid seemed to be on board for reducing the deficit saying he was in favor of cutting what doesn't work. House minority leader Nancy Pelosi was equally clear about doing so in her statement.

Yet the President and Democrats showed they had a limit.

Cutting the deficit by gutting our investments in innovation and education is like lightning an overloaded airplane by removing its engine, Obama said. It may feel like you're flying high at first, but it won't take long before you'll feel the impact.