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Obama seeks spending freeze to cut deficits

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President Barack Obama

President Barack Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Obama’s State of the Union address Wednesday and of the budget he will send to Congress next week for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

But it would exempt security-related budgets for the Pentagon, foreign aid, the Veterans Affairs and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.

The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.

President Barack Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Obama’s State of the Union address Wednesday and of the budget he will send to Congress next week for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

But it would exempt security-related budgets for the Pentagon, foreign aid, the Veterans Affairs and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.

The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.

The initiative holds political risks as well as potential benefits. Because Obama plans to exempt military spending while leaving many popular domestic programs vulnerable, his move is certain to further anger liberals in his party and senior Democrats in Congress, who are already upset by the possible collapse of health care legislation and the troop buildup in Afghanistan, among other things.

Fiscally conservative Democrats in the House and Senate have urged Obama to support a freeze, and it would suggest to voters, Wall Street and other nations that the president is willing to make tough decisions at a time when the deficit and the national debt, in the view of many economists, have reached levels that undermine the nation’s long-term prosperity. Perceptions that government spending is out of control have contributed to Obama’s loss of support among independent voters, and concern about the government’s fiscal health could put upward pressure on the interest rates the United States must pay to borrow money from investors and nations, especially China, that have been financing Washington’s budget deficit.

Republicans were quick to mock the freeze proposal. “Given Washington Democrats’ unprecedented spending binge, this is like announcing you’re going on a diet after winning a pie-eating contest,” said Michael Steel, a spokesman for the House Republican leader, Rep. John Boehner of Ohio.

The spending reductions that would be required would have to be agreed to by Congress, and it is not clear how much support Obama will get in an election year when the political appeal of greater fiscal responsibility will be vying with the pressure to provide voters with more and better services. The administration officials said the part of the budget they have singled out — $447 billion in domestic programs — amounts to a relatively small share, about one-eighth, of the overall federal budget.

The balancing act was evident Monday at the White House. Obama and Vice President Joe Biden outlined a number of new proposals that will be in the budget to help the middle class. They cover issues including child care, student loans and retirement savings.

It is the growth in the so-called entitlement programs — Medicare, Medicaid and Social Security — that is the major factor behind projections of unsustainably high deficits, due to rapidly rising health costs and an aging population.

The administration officials did not identify which programs Obama would cut or eliminate, but said that information would be in the budget he submits next week. For the coming fiscal year, the reductions would be $10 billion to $15 billion, they said. Last year Obama proposed to cut a similar amount — $11.5 billion — and Congress approved about three-fifths of that, the officials said.

Source: mercurynews.com

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