$120 Billion for Obama’s ‘Sputnik Moment’
Business + Economy

$120 Billion for Obama’s ‘Sputnik Moment’


Despite a five year freeze in his budget, President Obama emphasized the need for “investment” spending on programs to improve America’s competitiveness and spur job growth — what he calls a down payment on his “Sputnik moment” agenda to “win the future.”

“I’m convinced that if we out-build and out-innovate and out-educate, as well as out-hustle the rest of the world, the jobs and industries of our time will take root here in the United States,” Obama said on Monday. “Our people will prosper and our country will succeed.”

Three primary beneficiaries of this spending are education, high speed rail and infrastructure, and energy research.

  • One of Obama’s biggest down payments is on education, with a proposal of a 6.2 percent increase over estimated 2011 spending, according to a budget document. The president proposed $77.4 billion in discretionary funding for fiscal year 2012, up from an estimated $72.8 billion this year. 

The new spending plan would provide $1.4 billion for competitive grants to schools, including $900 million for a new round of funds for the Race to the Top excellence in teaching competition between states and school districts. The administration has claimed this initiative has stimulated education reform. Obama has pledged that by 2020, the U.S. will have the highest proportion of college graduates in the world. His request comes as the administration and Congress seeks to rewrite the Bush-era No Child Left Behind law.

Obama is asking for $80 million to train 100,000 new math and science teachers over the next decade. “We’ve had a shortage of math and science teachers in this country for decades now,” Education Secretary Arne Duncan said. “We want to put everyone on the table for those who are passionate about math and science.”

Increased education spending in the budget would help maintain the maximum $5,550 allowance for Pell grants, which serve needy college students. Continuing the higher grant would cost $44 billion over 10 years and $2 billion over the next year.

However, this increase is largely offset by a proposal to reduce loan subsidies for graduate and professional students. Currently the government pays interest on student loans for some graduate and professional students while they are in school. Eliminating that would raise $29 billion over the next 10 years. The administration proposed eliminating Pell grants for summer courses during college. This would raise $10 billion over 10 years.

By contrast House Republicans have proposed significant reductions and would bring the grant down to $4,705 and cut education spending by $4.9 billion for the remainder of fiscal year 2011 which ends on September 30.

  • High-Speed Rail, Internet expansion and Infrastructure: Earlier this month, the president proposed one of his signature initiatives, a six-year, $53 billion investment in a national high-speed rail network. He has said that development of high speed rail service, rebuilding roads and bridges and upgrading the nation’s broadband network would decrease the 9 percent unemployment rate and help America “win the future.” In his budget, Obama proposed $13.4 billion in discretionary funding for the Department of Transportation for fiscal year 2012, a $1.3 billion decrease from 2010 levels.

But Obama’s proposal has its detractors. “Trying to build a high-speed rail system is likely to repeat the mistakes we’ve been making with other systems that has lead to huge public deficits and unsatisfactory performance,” said Cliff Winston, author of Last Exit: Privatization and Deregulation of the U.S. Transportation System. “We should fix the problems of the existing systems that will improve performance before rushing out to build new systems.”

The budget calls for an ambitious six-year $556 billion proposal for highway, transit and passenger rail construction, as well as safety programs. This would include the high-speed rail project and approximately $10.5 billion already committed for train projects. To help pay for highway and transit construction, the administration proposes using $30 billion of the $556 billion as seed money to start up a national infrastructure bank that would make loans to major transportation projects. Obama also calls for $1.1 billion in cuts in grants for construction of large airports.

The White House calls for a wireless broadband network to bring high-speed Internet access to 98 percent of Americans, and establish an interoperable network for public safety, as an integral part to the economic infrastructure plan. The administration says it is fully paid for, and the sale of spectrum provides nearly $10 billion for deficit reduction.

Obama faces a complicated path to persuade Republicans, who control the House and oppose government spending to fix outdated infrastructure. Last week, House Republicans proposed slashing some $1 billion from high-speed rail programs.

Last year the President proposed the idea of an infrastructure bank but with little success.

  • Energy Research — The White House calls for $29.5 billion in funds for the Department of Energy, a 12 percent increase over the 2010 enacted spending levels. This largely reflects a priority in investments for clean energy, nuclear security and other related research. These spending initiatives are designed to jump-start the president's goal to move the U.S. to 80 percent of its electricity from clean sources by 2035.

In an attempt to attract potential electric car owners, the plan would offer the $7,500 tax credit into an instant rebate and spend around $600 million on vehicle research and development. There is an almost $1 billion increase for renewable energy, such as solar, biomass, geothermal, and building and industrial energy efficiency, as well as $853 million for nuclear research and development.

The budget would also provide more than a half-billion dollars for the Advanced Research Projects Agency-Energy, which encourages transformational energy research. The proposal would double the number of Energy Innovation Hubs to focus on technologies like battery and energy storage and new energy grid technologies. The plan also boosts the Energy Department's National Nuclear Security Administration with $12 billion, including $7.6 billion for Weapons Activities to maintain the nation's nuclear arsenal.

The energy plan calls for an additional $36 billion in loan guarantees for the Department of Energy to issue for civilian nuclear power plants. There is an approximate $500 million increase for the Office of Science bringing spending to approximately 5.4 billion from 2010 levels. The budget proposal also includes approximately $550 million for the Advanced Research Project Agency-Energy, which is research aimed at making energy technology breakthroughs.