Obama to call for partial budget freeze
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Last Updated: Tuesday, January 26, 2010, 17:31
  
Washington: President Barack Obama will Wednesday call for a three-year partial freeze on spending that would save 250 billion dollars over a decade, in a bid to show he is serious about cutting the huge deficit.

Obama will unveil the plan to cap discretionary non-security government spending in his State of the Union address, a showpiece event shaping up as a chance to recast his presidency amid a fierce political storm.

"We are proposing a hard freeze in non-security discretionary spending in 2011, and then continuing that freeze in 2012 and 2013," a senior administration official said on condition of anonymity.

"The savings from the three-year freeze will amount to 250 billion dollars over the next decade," the official said.

The fiscal straitjacket will lead to painful decisions on some government programs beloved of Democratic leaders and lawmakers in Congress and will crimp the spending plans of some of the members of Obama's own cabinet.

It may also force Obama to scale back the size of his ambitious reform agenda, just one year into his four-year term of office. Related article: One good term better than two bad ones: Obama

"You can't afford to do everything you might have always wanted to do," said one senior Obama administration official.

"That's the decision-making process the president and the economic team went through. It's the very same process American families have gone through for the past several years."

The US government closed its 2009 fiscal year with a record 1.416-trillion-dollar budget deficit and the White House forecasts an even bigger gap of 1.502 trillion dollars in fiscal 2010. Related article: Debt looms over Obama's prime-time address

The size of the deficit is one factor along with high unemployment and the sluggish economic recovery from the worst financial crisis in decades that is helping to drag down public perceptions of Obama's economic management. Related article: Obama vows to help middle class

Discretionary spending is made of expenditures that are appropriated on an annual basis by Congress, in a budget submitted by the president.

The spending is therefore optional, and the product of a choice by the government, unlike spending on entitlements like health care programs, or Social Security retirement schemes which is mandatory.

Those mandatory spending commitments will not be touched in the new plan, to begin with the 2011 budget, which will be rolled out on Monday.

Discretionary spending in the fiscal 2010 budget amounted to 447 billion dollars -- around a sixth of total outlays -- a figure that will remain constant in US budgets until 2013, the official said.

The freeze will save between 10 and 15 billion dollars on the 2011 budget, increase over the next two years and rise to the 250 billion dollar figure, the official said.

Under the top line figure, some government departments could see spending rise, while others could lose part of their allowance.

Departments likely to be hit will include Agriculture, Energy and Transportation, for instance, but the freeze will not, however, apply to departments and agencies tasked with national security, including the Pentagon.

"We are in the midst of fighting a war and have security needs -- we are going to fund those security needs as necessary," one official said.

Republicans have hammered Obama for big spending programs, including a 787-billion-dollar economic stimulus plan, and dismiss administration claims that the program saved or created two million jobs.

Fierce assaults on Obama's agenda, including his ambitious health reform plan, were one factor in the Republican victory in a Massachusetts seat last week that stripped away the Democratic supermajority in the Senate.

On Saturday, Obama offered support for a bi-partisan attempt in Congress to create a fiscal task force intended to tackle the burgeoning deficit.

The bill would establish an 18-member task force of 10 Democrats and eight Republicans with bipartisan co-chairs and seek to examine all aspects of the financial condition of the US government. The president has also made populist assaults on Wall Street, and last week traveled to an economic blackspot in Ohio to show everyday Americans that he cares about their plight amid 10-percent unemployment.

Bureau Report


First Published: Tuesday, January 26, 2010, 17:31


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