Obama Budget Preview: Deficit Tweaks, More for DoD
Obama Budget Preview: Deficit Tweaks, More for DoD
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The Fiscal Times
February 13, 2011

In a bid to reconcile the conflicting political demands for economic growth and deficit reduction, President Obama on Monday will unveil a nearly $4 trillion-dollar budget for 2012 that makes a modest down payment on his “Sputnik moment” investment agenda and attempts to trim the deficit by $1.1 trillion over the coming decade.

As promised in his State of the Union Address last month, the president’s overall budget request will include a five-year freeze on domestic spending. It will also call for slowing the growth of the Pentagon’s budget over the next five years, although defense would still see a sizable increase over current levels.

The president’s new budget, outlined for news organizations by a senior administration official on Friday, would target for reductions  such popular programs as low-income heating and air conditioning assistance, community development block grants and airport grants. Two-thirds of the savings would come from spending cuts, while a third would come from raising tax revenues – an approach certain to draw sharp opposition from the Republicans.

Taken together, the ten-year savings would go well beyond the cut that were outlined in an op-ed in the New York Times earlier this month,  in which Office of Management and Budget director Jack Lew said the overall plan will reduce the projected federal budget deficits by $400 billion over the next decade.  But the president’s new budget to be unveiled on Monday  nevertheless  represents only a minor reduction in the $6.9 trillion growth of the national debt that was recently projected by the Congressional Budget Office over the next decade. Moreover, Obama’s budget plan does not even hit the short-term goal he set for his bipartisan fiscal commission of reducing deficits to 3 percent of the gross domestic product by 2015.

“After a decade of rising deficits, this budget asks Washington to live within its means, while at the same time investing in our future,” Obama said in his weekly national address on Saturday.

Republicans in Congress are certain to dismiss the plan as “dead on arrival.” Last week, House Appropriations chairman Harold Rogers, R-Ky.,  proposed to cut domestic discretionary spending by $100 billion over the next seven months, a move Democrats branded as “draconian” and many budget analysts suggested would undermine the operations of crucial government agencies.

Given his own goal of freezing domestic spending at current levels, the president needed to find programs to cut or eliminate in order to come up with money to invest in education, infrastructure and clean energy—the three-legged stool of his investment agenda.

Education Spending
Secretary of Education Arne Duncan on Friday said the education department budget will continue the president’s commitment to his “race to the top” initiative, which received $1.35 billion of the department’s $46.7 billion budget this year. The program also received $4 billion in stimulus act funds. Instead of states competing for the money, as happened the first two years of the program, the administration plans to give local districts a chance.

Duncan also told reporters in a conference call that demand for Pell grants, which would allow low and moderate income students to attend college, have rapidly expanded during the Great Recession. “We’re absolutely committed to the program,” he said. “There’s been a huge uptake and we’re committed to continuing this.” The president, Duncan and Lew will travel to a Baltimore middle school on Monday afternoon to highlight the administration’s efforts to beef up science and technical education in the schools.

Investing in Infrastructure
Earlier this month, the president said he wants to invest $53 billion over the next six years to begin building out a high-speed rail network in the U.S  Leaks to the press about the budget suggested the president was willing to abandon some key political supporters to find money for his programs. Lew indicated programs slated for cuts included community development block grants ($300 million); community service agencies ($350 million); and the Great Lakes Restoration program ($125 million).

While the numbers associated with those programs are small, each is backed by important Democratic Party constituencies. CDBG grants have been a mainstay of urban economic development programs since the mid-1970s; the community service agency program, a legacy of President Lyndon Johnson’s War on Poverty, are also largely located in big cities and depressed rural areas; and cleaning up the Great Lakes is a high priority for Obama’s home state of Illinois and other Midwestern states.

The president’s budget will also call for cuts in half the low-income heating assistance programs, which helps poor people pay their oil and gas bills. That $2.5 billion in savings drew an angry reaction last week from liberal Democrats like Rep. Bobby Rush (D-Ill.), the only politician who’s ever defeated Obama in an election -- in a race for Rush’s House seat. “Our low-income American families must always be offered, and given, needed assistance to cook and to heat their homes in winter,” Rush said.

The president’s defense proposals were laid out last month by Secretary of Defense Robert Gates, who called for $78 billion in cuts over the next five years. But those “cuts” were actually only reductions from previously scheduled increases.

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.