WASHINGTON – President Barack Obama’s 2012 budget,made public Monday,reduces the deficit by more than a trillion dollars and emphasizes areas that are a theme of his administration: education,innovation and infrastructure.
Obama proposed massive cuts in domestic discretionary spending,outdated programs and national security to decrease the deficit and invest in areas that will generate economic growth. He proposed the $3.7 trillion budget to Congress Monday.
“Because 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 in a speech Monday at Parkville Middle School in Baltimore. “Our people will prosper and our country will succeed. But I’m also convinced that the only way we can make these investments in our future is if our government starts living within its means,if we start taking responsibility for our deficits.”
Austan Goolsbee,chairman of the President’s Council of Economic Advisers,said OMB anticipates the following key outcomes from the budget:
- The deficit should be in the range of 3 percent of the economy by the middle of the decade. It is currently at 9.8 percent.
- The recession will recover at a growth rate of 3.8 percent over five years.
- The unemployment rate should be at 8.2 percent by the fourth quarter of 2012. It was 9 percent in January,a decline from 9.4 percent in December.
- Inflation in the Consumer Price Index will be 1.3 percent in 2011. Prices for items in the CPI rose by 1.5 percent in 2010.
A five-year freeze on domestic discretionary spending will save $400 billion in 10 years,Jacob Lew,Director of the Office of Management and Budget,said. Grants to large airports and state revolving funds for water treatment plans will be affected by the freeze.
“Part of the cuts are in outdated programs,things that are duplicative and things that we would choose to cut just because it’s the right thing to do,” Lew said. “Part of the cuts are not going to be in that area. They’re going to be things that we wouldn’t do but for the fiscal challenges we face.”
Reductions in community development,the Low Income Home Energy Assistance Program and the Great Lakes Restoration Initiative are all programs Lew said wouldn’t have been cut if it weren’t for the current financial environment.
The budget puts a large emphasis on education,but the budget does cut some education spending. College students will no longer be able to receive Pell grants for summer school. Graduate students with student loans will begin accumulating interest while they are still in school. Now,interest accrues only after graduation.
Lew said $46 billion will be raised over the next 10 years by eliminating 12 tax breaks for oil,gas and coal companies. He said this money will help pay for the $148 billion that will be invested in overall research and development.
“This supports our goal of putting a million electric vehicles on the road by 2015,doubling our share of electricity from clean energy by 2035 and reducing energy use in buildings by 20 percent,” Lew said.
Lew predicted common sense dictates lower defense spending,which he said has been growing faster than inflation for more than a decade. The administration expects to save $78 billion over the next five years by reducing defense spending in areas such as unaffordable weapons systems.
Lew said there was a “bipartisan consensus” to protect two areas: a specific offset that pays to prevent the Alternative Minimum Tax from hitting middle-class families for at least three years,and $62 billion to avoid cutting Medicare doctors’ pay.