President Barack Obama released his 2012 Budget that makes strategic cuts in order to reduce the deficit, but is aimed at targeting scarce federal resources to the areas which he deems critical to “winning the future”: education, innovation, clean energy, and infrastructure. And it proposes to reform how Washington does business, putting more federal funding up for competition, cutting waste, and reorganizing government so that it better serves the American people.
“Having emerged from the worst recession in generations, the President has put forward a plan to rebuild our economy and win the future by out-innovating, out-educating, and out-building our global competitors and creating the jobs and industries of tomorrow,” the White House said. “But we cannot rebuild our economy and win the future if we pass on a mountain of debt to our children and grandchildren. We must restore fiscal responsibility, and reform our government to make it more effective, efficient, and open to the American people.
“The President’s 2012 Budget is a responsible approach that puts the nation on a path to live within our means so we can invest in our future – by cutting wasteful spending and making tough choices on some things we cannot afford, while keeping the investments we need to grow the economy and create jobs.”
“When I was sworn in as President, I pledged to cut the deficit in half by the end of my first term. The budget I’m proposing today meets that pledge -– and puts us on a path to pay for what we spend by the middle of the decade. We do this in part by eliminating waste and cutting whatever spending we can do without,” Obama said in a speech announcing the budget, Monday, Feb. 14, at Parkville Middle School Parkville Middle School and Center for Technology, Baltimore, Maryland.
The budget calls for a freeze on annual domestic spending over the next five years. This would cut the deficit by more than $400 billion over the next decade, bringing domestic discretionary spending to its lowest share of our economy since Dwight Eisenhower was President, lower even than it was under Ronald Reagan. Currently, spending is over 10% of Gross Domestic Product; the budget proposes to bring it down to 3.2% by 2015.
Some of the savings will come through less waste and more efficiency – for example, it proposes shedding14,000 office buildings – and demanding accountability for programs that are funded. “Instead of spending first, and asking questions later, we’re rewarding folks inside and outside government who deliver results. And to make sure that special interests aren’t larding up legislation with pet projects, I’ve pledged to veto any bill that contains earmarks,” he said.
Obama noted that not all the cuts come from attacking waste and efficiency, but some go to programs that are near and dear to him, like community action programs in low-income neighborhoods and towns, and community development block grants that so many of our cities and states rely on, and is already taking flack from progressives about cuts to the Low Income Home Energy Assistance Program.
“But if we’re going to walk the walk when it comes to fiscal discipline, these kinds of cuts will be necessary,” he said.
“But cutting annual domestic spending won’t be enough to meet our long-term fiscal challenges,” he noted.
“As the bipartisan fiscal commission concluded, the only way to truly tackle our deficit is to cut excessive spending wherever we find it -– in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes. So what we’ve done here is make a down payment, but there’s going to be more work that needs to be done, and it’s going to require Democrats and Republicans coming together to make it happen.
“We’ve begun to do some of this with $78 billion in cuts in the Defense Department’s budget plan, by ending tax breaks for oil and gas companies, and through billions of dollars in savings from wasteful health spending -– savings we’ll use to make sure doctors don’t see their reimbursements slashed and that they stay in the system seeing patients.”
“While it’s absolutely essential to live within our means, while we are absolutely committed to working with Democrats and Republicans to find further savings and to look at the whole range of budget issues, we can’t sacrifice our future in the process. Even as we cut out things that we can afford to do without, we have a responsibility to invest in those areas that will have the biggest impact in our future -– and that’s especially true when it comes to education.”
Obama said it will be crucial to gain bipartisan support to address the longer term structural issues. But the reaction from Republicans showed that bipartisan cooperation would be unlikely: Republicans are holding out for slashing entitlements like Medicare and Social Security, and cutting domestic spending across-the-board, and do not seem to be in the mood to compromise.
Senate Majority Leader Mitch McConnell dismissed Obama’s priorities, saying that the President apparently believes that “a future of trains and windmills is more important than a balanced checkbook.”
Regional Reporters Question Priorities
White House Senior Adviser David Plouffe acknowledged the need for bipartisan cooperation, saying “The President is deadly serious….. eager to work with Republicans and Democrats.. As result of last election, nothing will happen in Congress without support of both parties.”
But, Pflouffe added, “If we don’t do the right investing in infrastructure, education, and worse, if we cut indiscriminantly, we can put economic recovery and jobs in jeopardy.”
Plouffe and National Economic Council Director Gene Sperling and White House Senior Adviser David Plouffe discussed the key priorities in the 2012 federal budget In a conference call with regional reporters on Feb 14.
Sperling said, “This is a very tough, but pro-growth, pro-innovation budget that invests in key areas of winning the future in terms of competitive: education, innovation, research, 21st century infrastructure and yet are doing so under the imperative to bring our fiscal situation into something that is sustainable and encourages the type of investment climate we need to grow our economy and insure the best jobs are still located in the US.
“The five-year freeze: when you look at that, look at nonsecurity spending. Looking at domestic spending that doesn’t include veterans, homeland security. What does it mean to freeze, as president has called for, for five years Means that by 2015, percentage of economy is smallest since Eisenhower administration- that means that we will be spending less as percentage of economy than any year . under Reagan, Kennedy, Johnson…. even by 2014, it is the lowest since Kennedy.
“It means making tough choices: on education, the President is calling for extending the College Tax Credit initiative, which he already got extended for two years, but wants it permanent – that means a middle class family would be eligible for $10,000 tax credit over four years, and up to $20,000 if two children complete four years.
“On innovation, even though he is freezing spending, investment in basic research is up 12%, energy and R&D tech for clean energy, critical for clean jobs of future, is up 33%.”
This is paid for, he said, by reducing subsidies for oil that are outdated, unnecessary, inefficient. So we are reducing public debt on old incentives that are outdated to insure we can invest in clean energy future, without raising the deficit a single penny.”
The President also announced a new 4G wireless initiative that would reach 98% of Americans, “available for education, health and jobs benefit in smallest towns and biggest cities. As the 9/11 Commission wanted, we will have interoperable wireless system for all first responders nationwide.”
But instead of such a building such a system increasing the deficit, the President is looking to auction the spectrum, actually reducing the deficit by $9 billion.
“These are the types of choices the President is putting forward,” Sperling said.
Questioning by the regional press, though, criticized cuts to local projects, most striking among Republican and Tea Party bastions, like Alaska, Florida and Texas.
For example, reporter Libby Casey of Alaska Public Radio, was upset at cuts to a $10 million program in Denali.
Bart Jansen, from Florida, questioned why the NASA budget, which last year had a $6 billion increase over 5 years, this year is part of the overall spending freeze. “Is the President abandoning the agency?” he asked.
Tad Gillman from the Dallas Morning News, raised the point that the budget “holds the line on EPA regulatory spending and greenhouse gas regulation while it cuts on oil and gas. Folks in Texas see a bullseye on Texas. Are there political dimensions?”
Sperling responded, “This is about policy, pure and simple, It’s about doing what’s best to invest in the future and create the type of innovative, pro-green jobs future that our economy needs The measures in there on [oil and gas] were in the president’s budget before. But the savings would be important for supporting the significant increases in clean-energy R&D, which go up by $2 billion (33%) and doubling the energy innovation hubs, doubling the amount in the ARPA energy program which provides funds for blue-sky breakthrough research and energy.
“These things we think are good for country as a whole, pointing us to low carbon, high innovation, high green jobs future. And that is the sole criteria that guided us in putting this budget together.”
Republicans seem determined to force cuts in entitlement programs.
In response to the Boston Globe’s question about the need to cut entitlements, Sperling said that the issue of Entitlement reform was embodied in Obama’s Affordable Care Act – “health care reform that not only paid for itself but actually reduced the deficit by $230 billion over the budget cycle and expected over a $1 trillion in next 10 years.
“It is striking to think about what a difference that is to the previous decade where we had a signfiicant prescription drug benefit but nothing was paid for, and left us with legacy of high debt and deficit we are paying for.
“Obama puts forward a historic reform that not only pays every penny but puts forward additional savings, lowering the deficit, and policies that lead to over $1 trillion in deficit reduction. In addition, in this budget, there is $62 billion in additional health care savings, and using that so that we do not have to lower payments to doctors in a way to be harmful to Medicare, and showing we can [maintain payments] in a way that doesn’t add to deficit. In addition, $176 billion in overall mandatory savings when you look at mandatory reforms of FHA, pension benefit corporation. significant amount of mandatory savings.
“The President also believes if we are asking for this kind of spending restraint, leading to very difficult choices, that we also cannot afford to simply spend another $180 billion every year on tax cuts for those who are the most well off in our society. So this budget does not include a continuation of tax relief for those over $250,000, and those who are the most well off….. $80 billion more in debt reduction each and every year than there would be in budgets that called for continuing those measures.
“These proposals are a significant down payment, but the President recognizes that we need to come together as a country – both Houses, both parties – if we are to put ourselves on path…
A reporter for the Chicago Tribune pointed to the problem in Illinois (and many other states) that are “awash in red ink,” and now, the 2012 budget looks to cut allocations for the Great Lakes Restoration Initiative. “What is your message to governors?”
Sperling replied, “The President still believes in the initiative, but just like many other priorities in the budget, we have to put forward proposals that will ask for some shared sacrifice, even from initiatives that we think are worthwhile, if we are to live within our means…. tough choices. But this administration has shown a tremendous commitment for preventing, relieving the pain that states and localities have had to deal with, both during the financial recession and the aftermath.” That was the reason, he said, for proposing the historic relief, a moratorium on states’ repayment of debt on unemployment insurance.
“The best thing we can do for any state, city, is to help get more momentum in this economy, restore confidence in getting our fiscal house in order, and live within our means so we can make the critical investments in our future. We are very mindful of the very tough choices that governors and mayors are making.
He said that many of the allocations in Obama’s “high priority areas” will help governors, mayors, such as a new State small business initiative, giving states and governors funds they can use to invest in small business programs, making sure enough credit going out to small businesses, to make sure they are expanding and growing. That initiative was signed at the end of September and is just taking effect now.
“The President will talk to governors at end of month to find other ways to work together,” he said.
Key Budget Facts
- The Budget includes more than $1 trillion in deficit reduction – two-thirds of it from cuts – and puts the nation on a path toward fiscal sustainability so that by the middle of the decade, the government will be paying for what it spends and debt will no longer be increasing as a share of the economy.
- The President meets his pledge to cut the deficit he inherited in half by the end of his first term.
- Five-year non-security discretionary spending freeze will reduce the deficit by over $400 billion over the next decade and bring this spending to the lowest level since President Eisenhower sat in the Oval Office.
- 10-year Deficit Reduction: $1.1 trillion, excluding war savings and not extending 2001 and 2003 tax cuts for high-income earners. Two-thirds are from spending cuts.
- 2011 Projected Deficit: $1.645 trillion, 10.9 percent of GDP; 2012 Projected Deficit: $1.101 trillion, 7.0 percent of GDP; 2015 Projected Deficit: $607 billion, 3.2 percent of GDP; 2017 Projected Deficit: $627 billion, 3.0 percent of GDP
- $148 billion for R&D overall; robust investment in biomedical research at NIH ($32 billion, a $740 million increase over 2010 enacted level, post-transfers); more than doubles energy efficiency research, development, and deployment funds; and continues our efforts to double investments in key basic research.
- Supports the goals of: putting one million electric vehicles on the road by 2015; doubling share of electricity from clean energy sources by 2035; and reducing buildings’ energy use by 20 percent by 2020.
- Elimination of 12 tax breaks to oil, gas, and coal companies will raise $46 billion over 10 years to help pay for programs to reach these goals.
- Simplifies, expands, and makes permanent R&D tax credit.
- Establishes 20 new Economic Growth Zones, hard-hit areas that will receive expanded tax incentives to spur investment and employment.
- Maintains maximum Pell Grant award, helping 9 million students afford college.
- Paid for with more than $100 billion in savings, including eliminating year-round Pell and graduate student in-school loan subsidy.
- Reforms K-12 school funding by supporting high standards, encouraging innovation, and rewarding success.
- Consolidates 38 K-12 programs into 11 that emphasize competition and evidence of what works, while also eliminating 13 education programs outright.
- Expands the Race to the Top concept to early childhood education, school districts, university funding, and job training.
- Prepares 100,000 new science, technology, engineering, and math teachers.
- As part of a $556 billion comprehensive surface transportation bill, the Budget creates hundreds of thousands of jobs in the short term with a $50 billon up-front investment; establishes a National Infrastructure Bank to support projects of national importance; and brings access to high-speed rail to 80 percent of Americans within 25 years.
- Consolidates 60 duplicative, often earmarked programs into five. Investment will only be made if bipartisan financing is found to ensure that it does not increase the deficit.
- Builds a next-generation, wireless broadband network to bring high-speed Internet access to 98 percent of Americans, and establish an interoperable network for public safety.
- Plan is fully paid for, and the sale of spectrum provides nearly $10 billion for deficit reduction.
- A five-year non-security discretionary spending freeze that will reduce the deficit by over $400 billion over the next decade and bring this spending to the lowest level since President Eisenhower sat in the Oval Office.
- More than 200 terminations, reductions, and savings totaling more than $33 billion in savings for this year alone. Half of all agencies see their top line reduced from 2010 enacted levels.
- Sample cuts: Community Development Block Grants by $300 million; LIHEAP in half or by $2.5 billion, Great Lakes Restoration Initiative by one-quarter or $125 million; more than $1 billion in grants to large airports; $950 million to states’ revolving funds for water treatment plants and other infrastructure.
- Cuts $78 billion from the Pentagon’s spending plan over the next five years, bringing defense spending down to zero real growth. Including spending related to Iraq and Afghanistan, overall defense spending for 2012 is more than 5 percent below the 2011 request.
- Pays for the first two-years of “doc fix” – which will prevent a nearly 30 percent cut in reimbursements to doctors in Medicare and keep them seeing patients – with $62 billion in new, specific health care savings, including recommendations from the Fiscal Commission and recent bipartisan proposals, that will strengthen program integrity and increase efficiency and accountability.
- Pays for a three-year patch to prevent an increase in taxes on middle-class families through the Alternative Minimum Tax (AMT) by limiting the rate at which high-income earners can itemize tax deductions. This would bring the rate back to where it was during the Reagan Administration.
- The President has called on Congress to work with the Administration on corporate tax reform that will simplify the system, eliminate special interest loopholes, level the playing field, and lower the corporate tax rate for the first time in 25 years – without adding a dime to the deficit.
- The President lays out his principles to strengthen Social Security and has called on Congress to work on a bipartisan fashion to keep this compact with future generations.
- Includes important Fiscal Commission recommendations such as: federal civilian worker pay freeze, medical malpractice reform, PBGC reform, and a government reorganization initiative.
- Cuts more than $2 billion in administrative overhead like travel, printing, supplies, and advisory contract services.
- Embraces competitive grant programs based on the “Race to the Top” model applying it to programs from early childhood education through college; to allocate grants for transportation; to bring innovation to workforce training; and to encourage both commercial building efficiency and electric vehicle deployment.
- Sets up a process to quickly dispose of excess and under-utilized federal real estate.
- Starts a process to reorganize government so it is better able to serve the goal of a competitive America.
- Encourages new “pay for success” bonds in areas where government programs have too often failed. Taxpayers will only pay the programs if they produce results.
See complete information on the proposed 2012 Budget,
–Karen Rubin, Long Island Populist Examiner
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