Obama budget includes spending cuts, sets up debate with GOP

Reporting from Washington —
President Obama on Monday will propose a new federal budget that is $90 billion smaller than the one he offered last year and includes a combination of cuts and revenue increases aimed at chopping $1.1 trillion from the deficit in 10 years.

The president's $3.73-trillion spending plan cuts many popular programs while increasing spending in selected education and infrastructure programs designed to bolster the nation's economic competitiveness.

It seeks to shrink the deficit from an estimated 7% of gross domestic product this year to 3.2% in 2015, maintaining it at roughly that level through 2021.

In demonstrating a willingness to make cuts, Obama hopes to seize the initiative in what is certain to be a long and bruising debate on spending with congressional Republicans, who already have signaled a desire for much sharper cuts. In his budget, Obama made clear he will argue that while reductions are necessary, cutting to extremes is unwise.

"We're eager to work with the Republicans to cut spending and reduce the deficit," said a senior administration official who briefed reporters on the budget on condition of anonymity. "The debate in Washington isn't whether to cut or to spend. We both agree we should cut. The question is how we cut and what we cut."

Not all of the deficit reduction is in the form of spending cuts. Obama also is proposing an end to tax breaks enacted under President George W. Bush for the nation's wealthiest earners. About two-thirds of the deficit reduction over 10 years would come from cuts. The rest would come from revenue increases.

The proposed budget includes a five-year freeze on non-national security discretionary spending, which would save $400 billion, and the elimination or trimming of dozens of programs.

Obama is proposing to cut $2.5 billion in heating assistance for low-income people, at least $1 billion in grants to large airports and $300 million from Community Development Block Grants, a program popular with local government officials nationwide.

"This is a very difficult budget," Jacob Lew, head of the White House budget office, said in a CNN interview Sunday. "We're beyond the easy, low-hanging fruit."

The budget plan also would trim $78 billion from Pentagon spending over the next five years, eliminating additional transport planes, a Marine amphibious assault vehicle and an alternate engine for the Joint Strike Fighter. Those cuts mirror recommendations by Defense Secretary Robert M. Gates.

Also on the chopping block are a dozen tax breaks for oil, gas and coal producers worth $46 billion over 10 years.

"We are reducing programs that are important programs that we care about," Lew said. "We're doing what every family does when it sits around its kitchen table. We're making the choice about what do we need for the future."

While headlining the need to make painful cuts, officials insisted that selective budget boosts for education and infrastructure also were necessary.

The administration plans to expand Pell grants for college students, but would finance it through a $100-billion package of savings that could make it harder for some students to finance their education. The changes would eliminate the availability of the grants for summer students and increase the costs of graduate school loans by having interest begin to accrue while students are still in school, rather than after they graduate.

Officials also said the budget would include funding to bring high-speed Internet access to 98% of Americans and prepare for 100,000 new science and math teachers, but they offered few details on timing or financing.

The budget also would give tax breaks for investment and employment in 20 economically hard-hit areas of the country.

Obama seeks to solve, for now at least, some of the nation's more difficult budget problems. For instance, the budget would exempt many higher-wage earners from the alternative minimum tax for three years, but would do so by limiting tax deductions for those earning even more.

It also includes a two-year fix on the problems of Medicare reimbursements to physicians to head off a nearly 30% cut in payments, a problem Congress has been forced to solve by spending taxpayers' money each year.

Still, key House Republicans, reacting to leaks and previews of the budget, predicted that it wouldn't cut nearly enough to satisfy them.

House Speaker John A. Boehner (R-Ohio) dismissed Obama's five-year freeze on discretionary spending as inadequate because it was preceded by two budgets with large spending increases.

"Locking in that level of spending is way too much," Boehner said Sunday on NBC's "Meet the Press."

Boehner said that based on previews of the budget, it would "continue to destroy jobs by spending too much, borrowing too much and taxing too much."

Another key Republican, House Budget Committee Chairman Paul D. Ryan of Wisconsin, said any spending increase would come under scrutiny.

"If he is talking about coming and having new spending, so-called investments, that is not where we are going," Ryan said on "Fox News Sunday."

Ryan noted a new dynamic in Congress working in favor of leaner budgets.

"A year ago, Congress was debating about how much more spending to increase," Ryan said. "Now we are debating about how much more spending to cut."