Faced with a $20 billion bailout plan, Obama pushes for a new path for federal budgeting

President Barack Obama on Monday proposed a new plan for the federal budget that would allow for automatic spending cuts for the first time in nearly a century and raise the debt ceiling with a two-week debt ceiling increase.

The proposal, which is also the focus of a bipartisan debt-limit showdown that could force a government shutdown, would make it possible for the government to avoid some of the more stringent restrictions that have hampered the federal government’s finances for years.

It would also allow Congress to pass legislation allowing the government back into full fiscal control by passing a short-term spending bill that could be used to fund the government during a shutdown.

“We’re going to do what we need to do to make sure that we’re not running up a debt that we can’t afford to pay back,” Obama said in an interview with The Associated Press.

Obama, a Democrat, said the $20-billion increase in discretionary spending over the next decade would be sufficient to avert the worst of the debt crisis that threatens the nation’s finances.

Under current law, discretionary spending at the federal level has been cut by more than $200 billion each year since 2002, a sharp increase from the roughly $6 billion a year that Congress appropriates for that purpose.

That’s about a third of what the government has spent during the past 10 years.

But a looming government shutdown would force Congress to start cutting the discretionary spending of other agencies, such as the Environmental Protection Agency and the Labor Department.

The White House estimates that if the government was shut down for two weeks or longer, it could face $1.8 trillion in additional deficits over a three-year period.

Democrats are demanding an automatic spending bill, which would allow the president to make sweeping discretionary cuts, with the expectation that it will be passed by Congress and signed by the president.

While Congress has repeatedly rejected Obama’s demands for an extension of the current debt ceiling, Democrats and Republicans have agreed to a deal that would increase the debt limit for four weeks, extend a moratorium on borrowing and reopen the government for the year on March 14.

There has been no sign of the House or Senate negotiating a debt-ceiling deal since last month, when negotiators from both parties left for a weekend of talks in Philadelphia.

A debt-rescue package approved by Congress in December was intended to allow for the borrowing of up to $1 trillion in short-run funding to keep the government open during a potential shutdown.

It is now in the hands of a House Republican-led conference, which has promised to use it as leverage to get a debt ceiling hike passed in exchange for extending the moratorium on new borrowing.

Republicans have promised to vote on the debt-restructuring bill as soon as the House reconvenes next week.

In his interview, Obama argued that a debt limit increase was not needed in the current fiscal climate, noting that it would be necessary if Congress were to avert a default.

He said it would take a “new kind of thinking” to avoid a default, a phrase he used in his interview with AP.

Obama has proposed spending increases totaling $5.6 trillion over the coming decade, including $1,500 per child for the cost of the Child Tax Credit, $1 per student for college and other higher education, $500 for each of the nation ‘s 1.4 million public-sector employees and $1 billion for a federal “safety net” that will provide a safety net to the poor and working class.

The president said he wanted to eliminate the government’s “loopholes” by increasing the federal debt limit and allowing Congress to borrow to finance spending, but that it is important to recognize that “the debt ceiling is not going to fix everything.”

In a separate interview with Bloomberg News, White House budget chief Shaun Donovan said the president is hopeful the debt limitation deal can pass in the coming days.

If we can make a deal, we will make a bargain,” Donovan said.

As the deadline nears, the White House has signaled that it may seek to make concessions to Democrats to help overcome the standoff.

Obama, in his AP interview, said he was hopeful the deal would be reached by March 14 or sooner.

This is a historic moment,” Donovan told AP.

But the more we can do together, the better off we are.”