Today, the President sent to Congress his budget for the 2012 fiscal year. This document is built around the simple idea that we have to live within our means so we can invest in the future. Only by making tough choices to both cut spending and deficits and invest in what we need to win the future can we out-educate, out-build, and out-innovate the rest of the world.
This is the seventh Budget that I have worked on at OMB, and it may be the most difficult. It includes more than $1 trillion in deficit reduction - two-thirds from spending cuts -- and puts the nation on a path toward fiscal sustainability so that by the middle of the decade, the government will no longer be adding to our national debt as a share of the economy and will be paying for what it spends - and will be able to sustain that for many years afterwards.
The President has called this budget a down payment because we will still have work to do to pay down the debt and address our long-term challenges. But it is a necessary and critical step for we cannot start to move toward balance and to cutting into the size of our debt until we first stop adding to it - and that is what this Budget does.
It lays out a strategy for significant deficit reduction - the most deficit reduction in a comparable period since the end of World War II - that will bring our deficit down to about 3 percent of the economy by the middle of the decade and maintain it there for the rest of the budget window. Changing the trajectory of our fiscal path is a significant accomplishment, but to do this, it will take some tough choices. Let me highlight a few of them:
The Budget includes 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. To achieve savings of this magnitude it is not enough to cut programs that are outdated, ineffective, or duplicative - though that is where we need to start. It is also necessary to make cuts in places that, absent the fiscal situation, we would not reduce - such as energy assistance and community development grants for cities and counties.
In national security, which we are not freezing, we also are making real cuts. Defense spending has been growing faster than inflation for more than a decade, and we can no longer afford to stay on that path.
The Budget cuts $78 billion from the Pentagon's spending plan over the next five years, bringing defense spending down to zero real growth. It cuts weapons programs that Secretary Gates and the military leadership say we do not need and which we cannot afford. We are also capturing the savings that come from bringing our troops home from Iraq, which when added in brings defense spending down by more than 5 percent from the President's FY 2011 request.
Of course, cutting discretionary spending alone will not solve our fiscal problems. This Budget also deals with mandatory spending and revenue and takes significant steps to address our long-term fiscal challenges.
For example, this budget shows how we can pay for solutions to two problems that we have been too willing to kick down the road by putting on the national credit card: preventing a nearly 30 percent cut in reimbursements to doctors in Medicare to keep doctors in the system treating patients; and preventing an increase in taxes on middle-class families through the Alternative Minimum Tax or AMT.
In December, there was a bipartisan agreement to pay for a one-year extension of the so-called "doc fix" - which was not required by budget rules but was the right thing to do. Building on that, our budget identifies $62 billion of specific health savings to pay for the next two years of this fix - establishing a clear pattern that, consistent with our budget, this needs to be paid for in the future.
With regard to the AMT, we pay for three years of a patch by limiting the amount those in the highest tax bracket can receive for their itemized tax deductions. By bringing the rate back to where it was in the Reagan Administration, this is the biggest reduction in revenue-side spending in 25 years. This proposal is consistent with the Fiscal Commission's recommendation that we start to cut back on spending in the tax code, and if we continue on this path of paying for the AMT patch, after 2014, it will reduce the deficit by 1 percent of GDP by the end of the decade.
These both are down payments on long-term reform to reduce the deficit further, and the Administration looks forward to working with Congress to permanently covering these costs once and for all.
Similarly, as the President said in the State of the Union address, we are eager to work with the Congress on deficit-neutral, 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.
And while it does not contribute to our deficits in the short- or medium-term, the President has laid 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.
As we take these steps to live within our means, we also invest in the areas critical to future economic growth and jobs creation: education, innovation, clean energy, and infrastructure. And even in these areas, the budget cuts programs in order to fund high-priority investments.
For instance, in education we maintain the increased maximum Pell Grant level that we instituted, helping 9 million students afford college. We pay for it with $100 billion in savings, primarily from eliminating summer school Pell awards and the graduate student in-school loan subsidy.
In the area of innovation, we support simplifying, expanding, and making permanent the R&D tax credit, $148 billion in R&D investments -- including a robust $32 billion for NIH -- and meeting visionary goals to bring about a new clean energy economy. To help pay for these investments, lower priority programs are cut, and we eliminate 12 tax breaks to oil, gas, and coal companies that will raise $46 billion over 10 years.
And to build the infrastructure we need to compete, the Budget increases our annual investment by $35 billion a year, which is a 60 percent increase over the last surface transportation reauthorization bill. Not only does this plan consolidate 60 duplicative, often earmarked programs into five and demands more competition for funds, but we insist that this bill be paid for -- and we look forward to working in a bipartisan manner to do that.
In my last tour of duty here in the 1990s, we made the tough, bipartisan decisions needed to bring our budget into surplus. Once again, it will take tough choices to put us on a sustainable fiscal path. But we should not settle for shortcuts. We need to be true to our values and make the right investments to win the future. As we make these choices, it is critical that we do not cut areas that are essential to helping our economy grow and making a difference for families and businesses. After all, a growing economy where more Americans are working is the best way to reduce our deficits and debt. It is the wind we need at our backs for this already difficult journey.
Another clear lesson in working in the Congress and here at OMB is that cutting spending and cutting our deficits requires us to put political differences aside and work together. It takes putting the country ahead of party, and the next generation ahead of the next election. Along with the entire Administration, I standready to do that and look forward to working with both sides on Capitol Hill to crafting a set of policies that enable us to live within our means and invest in the future.
Our society has been made greater and stronger by helping the disadvantaged - Now you and our President (and a Democratic President at that) seek to weaken our country and set us back by cutting programs for the needy. I expect this proposal is simply a lead-up to trying to cut Social Security and Medicare (At least, that has been Obama's M.O. since he has been in office). You should both be ashamed.
I hope that this will finally be the last straw for Democrats... We need to understand, the President is not working for us or with us, he working against us. It's time to say, enough is enough, we're not going to take it anymore.
Really? How?
Okay.. I'll give you a very brief comment but please pay attention (which can be difficult if you are all do_ped up on tea, so stay off that stuff). In the 1930's and 40's, federal programs like the CCC and WPA put millions of Americans to work and brought us out of the Depression. Because of programs like Social Security and Medicare, we have had several generations of seniors now who were not burdens on society, who were not homeless, but who were able to care for themselves and who were consumers in the American market. Millions of people have become educated and bettered their lives because of government financial aid programs. Our Veteran's Administration provides needed health services to millions of American veterans. This list goes on and on, and could fill volumes.
Are you getting the picture?
Our country is going broke trying to control the world.
Last time we cut taxes on the rich,, things got worse. why are we still doing that?
This new math ........escapes me. I can remember when 1+1 minus 10 still resulted in a negative number.
In Colorado, Republicans cut $125.000 from a program to feed needy school children, because "the state is in a financial bind, and we simply can't afford it" On the same day, they passed tax cut extensions to the largest Workers Comp Insurance company in the state. Tax cuts that amount to over 3 million dollars a year. To a company whose management is so insular, and board members so corrupt that top managers and members of the board recently wasted $318.000 in 5 days to play golf. The booze tab alone was over $6,000.
Our State "can't afford" to spend 30 cents per child per day ($125,000), but apparently we CAN afford $3 million in tax CUTS. (a unanimous Republican vote)
The logic of that agenda escapes me, and the logic of claiming you are serious about bringing down the deficit while at the same time giving tax cuts to those that don't need them, and already pay a hypocritically low tax rate escapes me as well.
Here's a novel idea, how about a welfare system for the needy.............. instead of the greedy.
America, what have we become?
The United States military is bigger than the next 17 militaries combined.
We now send our military to be mercenaries to benefit other countries.
We spend huge amounts to support the military-industrial complex.
Give corrupt payments to warlords in Afghanistan, Pakistan, Egypt, etc.
All for the benefit of the interests of big corporations and oil companies - that don't pay taxes and ship jobs offshore.
Obama's military cuts are an ironic joke.
And, with the benefits he granted the rich, all the cuts, in toto, amount to 20% of the cuts he gave the rich. So, the deficit will increase.
Outcomes matter.
Obama is lying.
We can afford to buy health insurance from wall street CEOs with no cost controls.
We can afford to out source every single last job (except CEOs selling insurance, and I supposed that's next) to unregulated low wage, low skill markets in Asia.
Education? R&D? Social services? We certainly can't afford that!
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mr lew - how can you in good faith say this document addresses the hypocrisy of giving tax breaks to those who don't need them, and stripping out or defunding programs that are needed?
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yes, we must live within our means. each household at or near poverty level, knows that. each household who is among the working poor knows this. it seems that those blessed with high paying stable jobs either don't care or turn a blind eye. now, we have it in printed form that our administration does not care about us, only the top 2%-ers.
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http://www.orionmagazine.org/index.php/articles/article/166/
http://www.mountainjusticesummer.org/
Oh right. Obama believes in the fantasy of "clean coal." I forgot.
Bring the soldiers home, cut defense spending in half, end tax cuts for the rich (which not only didn't produce jobs over the past 10 years, but actually resulted in intensified offshoring of American jobs and manufacturing). Problem solved.
Of course, the latter would take political courage, while the former is merely business-as-usual in D.C.
Only one party is willing to address ever one of these issues not caring about who's moneyed men or political party it hurts. That party is the American party. The only party who is willing to look at what needs to be done and do it.
Do you guys need a web developer? I got time on my hands.