President Obama's budget illusion

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Obama's budget pitch built on dishonesty?

How House Republicans like Rep. Paul Ryan plan to respond to the president's proposal

This is a rush transcript from "Journal Editorial Report," February 18, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," President Obama's budget illusion. He is promising lower spending, higher taxes and sinking deficits? We'll tell you what you will really get, and ask House Budget Chairman Paul Ryan how Republicans plan to respond.

As Rick Santorum's surge continues, Mitt Romney is fighting back, attacking the former Senator as a pro-union, big spending Washington insider. So, is he?

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: We've got to do everything in our power to keep this recovery on track. Part of our job is to bring down our deficit. And if Congress adopts this budget, then along with the cuts we've already made, we will be able to reduce our deficit by $4 trillion by the year 2022.

(END VIDEO CLIP)

GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

That was President Obama Monday unveiling his $3.8 trillion budget fiscal for 2013. There are lots of promises in those 2,000-plus pages, including, as you heard, a $4 trillion deficit reduction allegedly over 10 years. So can the president deliver?

Republican Congressman Paul Ryan is chair of the House Budget Committee. He joins me now from Capitol Hill.

Welcome.

REP. PAUL RYAN, R-WISC., CHAIR, HOUSE BUDGET COMMITTEE: Hey, Paul. How are you?

GIGOT: So you have been severely critical of the president's budget this week for its spending increases, no serious entitlement reform and tax increases. What can House Republicans do about it this year?

RYAN: We're going to offer an alternative path. Look, if you strip away all the president's budget gimmicks, accounting tricks, it gives you $400 billion in deficit reduction over 10 years and it increases spending, net spending increases by $1.5 trillion, and because he raises taxes by $1.9 is how you get this $400 billion figure. An average of $40 billion of deficit reduction every year when we're racking up trillion dollar deficits. So it's --I don't know how to describe that --

(LAUGHTER)

--other than it's not serious.

(LAUGHTER)

GIGOT: Well, that's OK. So --

(CROSSTALK)

GIGOT: -- if he's proposing --

RYAN: We're going to put up an alternative, Paul. we thing, look, if we don't like the direction the president is taking the country, the direction for debt and decline, we owe the country an alternative choice by putting specific solutions on the table, how to reform the tax code, how to reform entitlement spending, how to cut government spending, how to get the debt under control. And we'll do that, Paul, just like we did last year. We'll do it again this year. So voters, meaning Americans --

GIGOT: Right.

RYAN: -- are going to have a choice two futures from which to choose from this fall. That's what we see our job as being.

GIGOT: Are you going to put the Medicare reform plan, the same one you passed last year, in this bill this year? As you know, many privately, in the Republican conference -- I don't want to make that again. You are going to put it in again?

RYAN: Yes, we are not backing off on any of our policy reforms. If you are not serious about taking on these entitlement issues, about dealing with the unfunded promises to Americans, then you are not serious about fixing our fiscal situation. We need to have half of our government, the Republican side, being serious about fiscal situation. If we duck this responsibility, then no one is being responsible in Washington and we'll have a debt crisis, and we can't let that happen.

GIGOT: If Republicans do pass a budget and the Senate, which has already said they're not going to pass one, doesn't, where does it leave you? How do you get more spending reduction this year than you got last year? Unless -- you got none, basically. It was flat. You held it flat, which was better than the increases of the previous two years, but you didn't cut a lot of spending?

RYAN: No, and that is the problem, Paul. When you are the minority party in divided government, with the Senate not doing any budgeting for three years now, the president doing this, there is no more opportunity. I think after this last week, it doesn't look like, according to at least the White House, that much more is going to get done. The way we look at it is, we need the American people to help us break this logjam. We need the American people to give us the ability to fix this problem. So in election, we need owe them a very clear, sharp, legitimate choice of two futures, so we can have an affirming election, not where we win an election by default and then split differences and muddy everything. An affirming election where the country says get us back to the American idea, get us back to solvency. So we need to put a budget out there. No, it's not going to pass into a law this year, as you just described. And, no, we won't be able to get a lot of savings because the Senate's gridlocked and the president won't cut spending. So we'll have to kick this upstairs to the American people and let them decide.

GIGOT: So you're saying, for this year, the best the American public can probably expect from you guys is basically hold things level, no more increases, status quo?

RYAN: If you want to change that, you have to pass budgets to change it. We will pass a budget that shows how we will change it, but if the Senate chooses thought to pass the budget for the third year in a row, which Senator Reid already announced, then no budget ever occurs. The way it works is --

GIGOT: Right.

RYAN: -- the House and Senate have to pass a budget by April 15th. We have a law that says we have to do this. If one of those breaks down, then no budgeting occurs, so nothing happens. And the Senate didn't do a budget in 2010 and 2011, and now they have already announced they aren't going to do a budget in 2012. So that's the frustration. You understand our frustration now. So we'll just take it to the country and let them decide.

GIGOT: You tried last year and you promised in the campaign to cut about $100 billion worth of spending. What lessons did you learn last year from the hard slog where it didn't succeed, that you might be able to use to at least get some better performance this year, better outcome?

RYAN: The lesson we learned is divided government is very difficult. The whole payroll thing is an example of that. Democrats wouldn't agree to $100 billion of spending cuts over a 10-year period. The president wouldn't agree to spend $46.9 trillion instead of his planned $47 trillion over the next 10 years over just this issue. So we passed budgets that cut those spending levels, but when you have a White House and Senate that is just unwilling to cut spending, that is the gridlock we have. When you have a Senate that won't do any budgeting, that's the problem. We have to break this gridlock and get back to dealing with this problem in a serious way. We feel we have a moral and legal obligation to show the country what we would do if they gave us the permission and the power to do it by giving the House, the Senate and the White House.

GIGOT: All right. We'll look to see what you propose in that budget.

Thanks for being here.

RYAN: You bet. Take care, Paul.

GIGOT: Still ahead, congressional Republicans may not be buying what President Obama is selling in his budget. But with his approval rating on the rise, is the American people ready to sign on to his second-term agenda. Our panel weighs in, next.

(COMMERCIAL BREAK)

GIGOT: Paul Ryan and his fellow Republicans may not find much to like in President Obama's budget, but with his approval back up at the 50 percent mark, is the American public buying into an his agenda for a second term?

Let's ask Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

So, Kim, I want to go around quickly to everybody. What is the one thing in the budget the public doesn't know about, but should?

KIM STRASSEL, WASHINGTON COLUMNIST: One thing that's interesting with this budget, is it has kicked off a discussion of how the Obama administration would deal with future tax reform. Among the ideas was a global minimum tax. Obviously, there's a lot of companies that go and create jobs overseas because other countries have better tax rates than us, rather than the Obama administration pushing to lower our tax rates to make us competitive. They are now arguing we should simply further tax those companies, penalize them for working overseas.

GIGOT: All right, Dan?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I almost hate to say it, Paul, but the budget includes a $10,000 subsidy for electric cars, like the Volt and the Leaf.

(LAUGHTER)

$10,000. This is basically a bribe to suburban voters.

(LAUGHTER)

GIGOT: Yes, that's right. OK.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: I'm not taking it.

(LAUGHTER)

I think the most remarkable thing is usually when politicians roll out budget plans, they acknowledge they are going to spend too much now but, in the future, things will be better and they're going to have discipline and everything is going to balance. What is remarkable about this plan is that there is no point in the future where it even projects sanity.

(LAUGHTER)

They are saying deficits, debt forever. This week in congressional testimony, Obama officials refused to say when it was going balance. The answer is no.

GIGOT: The striking thing is what this budget shows is, for four years -- this first term, spending as a share of the economy will be over 24 percent when the average is closer 20 or 21, and trillion-dollar deficits or more in all four years. That has not happened since World War II. Never. This is the most fiscally irresponsible record in modern American history.

HENNINGER: Nobody will know that unless Santorum and Romney start talking about it. The president won't.

GIGOT: Kim, what does it tell you about the president's campaign strategy or second-term agenda?

STRASSEL: There is a second-term agenda we have discovered from the budget and it is that the president will be spending it, taxing everyone to pay for the extraordinary spending you mentioned. And because he intends to keep spending that way in the future. That's what the budget shows. You need a super computer to add up all the taxes on investment income, ordinary income, corporate, all the taxes in Obama, debt. This is the administration finally admitting that this is what they are going to have to do to pay for their spending.

(CROSSTALK)

GIGOT: Political strategy, James, political strategy -- what -- you don't want to go into an election saying, I'm the biggest spender in history. What is the calculation here?

FREEMAN: Well --

(CROSSTALK) GIGOT: Does he figure that, like Dan says, the Republicans are too dimwitted to mention it?

FREEMAN: As Dan said in his great column this week, this is a political document but really it's more of a statement of belief. I think what you are seeing is ideology, but it is remarkable that -- this something people ought to understand, because the president talks about how we have to make tough choices, it's a matter of simple math, and that is how he justifies tax increases. But the tax increases are increasing not as fast as the spending and debt. More than $11 trillion in new debt, even assuming his tax increases.

GIGOT: Dan, I think the strategy has been increase spending. Ultimately, you will have to raise taxes to pay for it. In a second term, the idea is to try to get a Value-Added Tax, if possible, or a major energy tax. They know they can't pay for this spending just by taxing the rich. If you think that, I've got some Greek bonds to sell you. Is that what we're going to see in the second term?

HENNINGER: I wouldn't be surprised. You would have to do something like that. But I think the political strategy is more cynical than that. Tim Geithner, the treasury secretary, went before the Finance Committee and the Ways and Means Committee this asked, and he was asked about this sort of non sequitur in the budget, on Medicare. They've done nothing on entitlements.

GIGOT: Right.

HENNINGER: And what Geithner said is, we think it's preferable to raise taxes on the top 2 percent rather to make cuts of equivalent magnitude in Medicare and other programs. What they are doing, they are forcing the Republicans to be the party that talks about reforming Medicare by making cuts or making some people pay for it themselves. Then the Democrats are going to run out and demagogue the issue and make the Republicans -- as the party of Medicare cuts and other cuts refusing to raise -- and the party wants to raise taxes.

GIGOT: Quickly, James, is this going to work politically?

FREEMAN: I don't think so. They made the Buffet Rule, going after rich people, a centerpiece of their argument. It's not actually in the budget. I'm wondering if they have figured out that the Buffet Rule doesn't really affect Warren Buffett, and there probably are lots of other rich people who won't be affected that much either.

GIGOT: Yes, but if Republicans don't join the debate and make the case, they're going to lose.

All right, when we come back, as Rick Santorum continues to climb in the polls, Mitt Romney goes on the attack, painting his opponent as a big- spending Washington insider. So, is he? We'll take a closer look at Santorum's Senate record, next.

(COMMERCIAL BREAK)

GIGOT: The Santorum surge continues with the former Pennsylvania Senator leading Mitt Romney among Republican voters nationwide, and in Romney's childhood home in Michigan, where they square off in a critical primary just over a week from now. Romney is not taking any of this lying down. He and his surrogates are on the attacks, taking aim at Santorum's record in the Senate and painting him as the consummate Washington insider.

(BEGIN VIDEO CLIP)

AD NARRATOR: How did Rick Santorum actually vote? Santorum voted to raise the debt limit five times and for billions in wasteful projects, including the bridge to nowhere. In a single session, Santorum co- sponsored 51 bills to increase spending and zero to cut spending. Santorum even voted to raise his own pay and joined Hillary Clinton to let convicted felons vote. Rick Santorum, big spender, Washington insider.

(END VIDEO CLIP)

GIGOT: All right so, Kim, is this what Rick Santorum is going to see in Michigan, an assault like he used in Gingrich in Florida?

STRASSEL: You bet. Romney is very good about that. They did it against Perry in Iowa and Gingrich in Florida. They will come out with all guns blazing in Michigan and in Arizona. The question is whether or not he is a big spender insider. Another big area they're targeting is Mr. Santorum's labor record. His votes, in particular, for some union issues having coming from a state like Pennsylvania.

GIGOT: How valuable is Santorum on the big spender charge?

FREEMAN: He is not vulnerable. He would be vulnerable if he was competing for conservative votes against Jim DeMint.

(LAUGHTER)

GIGOT: The Senator from South Carolina. Tea Party senator.

FREEMAN: Right. Yes. Against Mitt Romney, I think it's clear that Santorum is the economic conservative. You might see he is not electable for other reasons, but in terms of spending, he was more conservative than the average Republican in the Senate.

GIGOT: His National Taxpayers rating was "A"-minus for --

(CROSSTALK)

FREEMAN: Consistently strong. If you want to talk about real spending reform, you're talking about cutting future liabilities from the entitlement system and he led the charge on that on Social Security. It ended up costing him an election, in part. To go after him as a big spender is ridiculous.

GIGOT: On that entitlement point, I remember writing column about him and his Social Security reform. He was for private accounts before George Bush was and when it had been tried as a political issue. That was very great.

Dan, what about this union point?

HENNINGER: He represented Pennsylvania. I've looked at the record. Basically, there was a good Rick and bad Rick. The good Rick was the Senator that served the first four years of the term. As it got close to the reelection in the last years of the term, a lot of what Romney says is true. That happened in the final years of his term as he got closer to the Pennsylvania vote.

GIGOT: OK. But an awful lot of our viewers would say --

(CROSSTALK)

GIGOT: They would say that is cynical. That is politics as usual. That is not what I want.

FREEMAN: No, wait a minute.

(LAUGHTER)

2006, his election year, which is the worst from a free market perspective, he has 20 percent rating from the AFL/CIO. In his worst year, he is voting against big labor 80 percent of the time. This is not the union's man in Washington. What he has said he is not hostile to private- sector unions. He has made the case that taxes and regulations are the way to help workers.

GIGOT: Kim, get in here?

STRASSEL: I disagree. The union issue is a big issue this year, with Boeing and all of these questions, and he has been on the wrong side of this. Regardless of whether you think election politics was the main factor, because, as Paul said, that is a sort of cynical view. The problem he faces is, one, a lot of voters may question exactly that. Is he in hock to organizations like that simply to get reelected and is that the kind of guy we want and are those the principles we want. That's the problem he faces.

GIGOT: All right, I want to throw to a Santorum ad that is running against Romney.

(BEGIN VIDEO CLIP)

AD NARRATIVE: Mitt Romney's negative attack machine is back on full throttle. This time Romney is firing at Rick Santorum. Romney and his super PAC have spent a staggering $20 million attacking fellow Republicans. Why? Because Romney is trying to hide from his big government Romneycare and his support for job-killing cap-and-trade. In the end, Mitt Romney's ugly attacks are going to backfire.

GIGOT: Dan, is that going to inoculate the senator?

HENNINGER: It's a pretty fun ad.

(LAUGHTER)

I think it is fairly effective. He is representing Santorum as a pro- union guy. Santorum is campaign in Michigan criticizing the auto bailout. So he didn't take the bait in that respect. This Romney-care is a big problem for Mitt Romney. That is how Santorum got into the race by criticizing it in substance. Romney has still not come up with an adequate position to inoculate himself against the criticism for what he did in Massachusetts.

GIGOT: Romneycare and cap-and-trade are much bigger problems philosophically than earmarks and right-to-work.

FREEMAN: I was going to say, the Romney organization has not come up with much in the Opposition Research Department, if they've decided the way to try to make this work is say Mitt Romney is the economic conservative versus Santorum, clearly the Romney-care and other policies are huge government intervention.

GIGOT: Kim, quickly, how much trouble is Romney in if he loses Michigan?

STRASSEL: He is in big trouble because Santorum goes into the Super Tuesday stakes on March 6th with a lot of momentum. And then he begins to not look like he's the front-runner anymore.

GIGOT: OK.

We have to take one more break. When we come back, "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Time for "Hits and Misses" of the week.

Kim, first to you.

STRASSEL: This is a hit to a new trend documented in our paper of doctors that are firing patients, telling them to go to a new practice if they will not vaccinate their kids. Doctors have been part of the problem of this medical scare that supposedly vaccines cause autism. It's not true, but too frequently they have been coddling parents, giving kids waivers to still go to school without vaccinations and this has caused a resurgence for deadly diseases. That they are now putting their foot, tell parents they have to do this for their kids and the community, is best shot at reversing this problem.

GIGOT: Here, here.

James?

FREEMAN: A hit to a government agency, believe it or not. That would be the Immigration and Naturalization service for managing to let into the country in the mid '70s two engineers from Taiwan. They settled in California. I'm sure they helped U.S. science and technology. But the wonderful unintended consequence, they had a child named Jeremy Lin, who is now tearing up the NBA. It's Linsanity here in New York. It's one of those benefits of immigration. To quote our colleague, Jason Riley, let them in.

GIGOT: All right.

Dan?

HENNINGER: I'm giving a miss to the president of the United States, who is in Los Angeles, at a big Hollywood fund-raiser this week. This is what he said: "One of the proudest things in my three years in office is helping to restore a sense of respect for America around the world, a belief that we are not just defined by the size of the military. The idea is we love the troops but we just hate the military." I really don't understand the distinction.

GIGOT: Who believes we were defined by the military, other than the enemies --

(CROSSTALK)

HENNINGER: Intellectuals in Europe and Barack Obama.

(LAUGHTER)

GIGOT: All right.

And remember, if you have your own "Hit or Miss," please send it to us at jer@foxnews.com. And visit us on the web at foxnews.com/journal.

That it for this week's edition of the "Journal Editorial Report." Thanks to my panel and especially to you for joining us. I'm Paul Gigot. We hope to see you here next week.

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