WASHINGTON -- Less than two months after signing tax cuts for the wealthiest Americans into law, President Barack Obama proposed a spending plan to Congress that cuts funding to programs that assist the working poor, help the needy heat their homes, and expand access to graduate-level education, undermining the kind of community-based organizations that helped Obama launch his political career in Chicago.
Obama's new budget puts forward a plan to achieve $1.1 trillion in deficit reductions over the next decade, according to an administration official who spoke to the Associated Press on condition of anonymity in advance of the formal release of the budget.
Those reductions -- averaging just over $100 billion each year -- are achieved mainly by squeezing social programs. A deal struck to extend the Bush tax cuts for just two years, meanwhile, increased the deficit by $858 billion dollars. More than $500 billion of that bargain constituted tax cuts, with billions more funding business tax breaks and a reduction in the estate tax. Roughly $56 billion went to reauthorize emergency unemployment benefits.
The president's budget was expected to mostly target "non-defense discretionary spending," which makes up less than one-quarter of the overall budget, making balancing the budget with such cuts mathematically impossible.
Indeed, the driver of the deficit is tax cuts. The Wall Street Journal is reporting that as a result of the tax cut deal, the projected deficit in Obama's budget will reach a "record" level of $1.6 trillion this year, though that figure, relative to the size of the American economy, is far lower than many other governments around the world, according to data compiled by the Central Intelligence Agency. And the relative deficit is well below the levels of the 1940s, a time of economic prosperity. "President Barack Obama's 2012 budget proposal projects this year's deficit will reach $1.6 trillion, the largest on record, as December's tax-cut deal begins to reduce federal revenues, a senior Democrat said Sunday," the Journal reported Sunday evening. (The deficit is only a record if it is neither adjusted for inflation nor considered relative to the size of GDP.)
A closer look at surveys suggests that when people say they are concerned about the deficit, they are actually worried about the economy.
The president's official budget proposal was released Monday morning and we'll be adding updates with breaking news and reactions throughout the day.
02/14/2011 6:32 PM EST
Republicans Show Little Support For Plans To Eliminate Oil Subsidies
Elise Foley reports:
Republicans have been quick to criticize Obama’s budget plan for doing too little to bring down the deficit. But so far, few have been willing to support proposals to eliminate subsidies for oil and gas companies -- even after a former big oil president said last week that major oil companies could do without them.
Democrats are targeting oil subsidies as a potential source of revenue as Republicans seek major cuts from social programs. Obama’s budget plan would eliminate roughly $4 billion in annual federal subsidies to oil and gas companies; Rep. Edward Markey (D-Mass.) introduced a bill last week to cut the subsidies by about $5 billion.
Although some Republicans have said they are open to looking at the subsidies, Sen. Jeff Sessions (R-Ala.) indicated some hesitation on Monday, telling reporters “it’s well worth looking at” but may not be worth the potential threat to energy independence. Supporters of the subsidies, including the oil lobby American Petroleum Institute, claim they are necessary to keep major oil companies operating in the United States.
As a senator from Alabama, many of Sessions' constituents benefit directly from oil subsidies.
“I’ve got to tell you, one of the most devastating events on the American economy is the slowing down dramatically of further production in our gulf,” Sessions said. “We need to make producing American oil more attractive than importing foreign oil because American oil creates jobs here and otherwise we’re sending our wealth abroad.”
02/14/2011 5:16 PM EST
Republicans Respond To Obama Budget: 'It Would Be Better To Pass Nothing'
Elise Foley reports:
Republicans bashed the president's budget proposal on Monday, calling it a punt down the road for the nation's deficit and criticizing Obama for not including a plan to change the way the government deals with Social Security and Medicare. House and Senate Republicans said Obama's budget, which the White House said would cut the deficit by $1.1 trillion over the next decade, would actually lead to increased spending and more debt for the country.
"It looks like to me that this thing has about $8 of tax increases for every $1 of spending cuts," said Rep. Paul Ryan (R-Wisc.), chairman of the House Budget Committee. "You really cannot borrow and spend and tax your way to prosperity, but unfortunately that's what this budget does."
Read the full story here.
02/14/2011 3:26 PM EST
Robert Gates: Pentagon Willing To Settle For Smaller Budget
The Associated Press reports:
Defense Secretary Robert Gates says he is willing to settle for a smaller Pentagon budget this year than the administration originally requested, but insisted that the total -– not counting war costs -– cannot be less than $540 billion. That is about $9 billion less than the White House first requested.
Gates was referring to this year's budget, which has not been approved by the Congress. Instead the Pentagon has been required to stick to last year's spending level.
Gates said this requirement has been damaging and, if not fixed, may soon turn into a crisis.
Gates made his remarks while presenting the administration's defense spending proposal for the next budget year, which begins in October.
02/14/2011 2:29 PM EST
Obama Budget Boosts Work Sharing
Arthur Delaney reports:
The Obama administration’s budget proposes a boost to state work-sharing programs that prevent layoffs by allowing workers to share the pain of the recession through reduced hours.
“To help employers keep workers on the job, the Budget will encourage States to expand use of short-time compensation,” the administration's budget says. “Also known as work-sharing, this voluntary employer program helps firms retain workers by reducing employees’ weekly hours instead of laying them off. Workers with reduced hours receive a partial unemployment check to supplement their reduced paycheck.”
The administration would provide temporary federal funds for work-sharing benefits and encourage states to expand the programs, but Monday's budget did not provide details about how much money would be made available. The proposal may eventually resemble legislation introduced in previous sessions of Congress by Sen. Jack Reed (D-R.I.).
Kevin Hassett, a senior fellow with the conservative American Enterprise Institute who is a fan of work-sharing, told HuffPost in an email that the work-sharing proposal is “clearly the high point of an otherwise disappointing budget.”
“It is nice to see the administration propose the expansion of existing work sharing programs,” Hassett wrote. “The unemployment rate is still high, and it is not too late to try some policy innovation in this space.”
Only 17 states currently have work-sharing programs. They work like this: Instead of firing somebody, a participating business would have five employees work four-day weeks. The government would reimburse those workers for the fifth day with 20 percent of what they'd receive for a week in unemployment insurance benefits.
The program doesn't save money for state unemployment trust funds, but it can save jobs and prevent people from falling into permanent joblessness.
"It’s a very positive step that the administration is talking about providing incentives for states to enact these programs," George Wentworth, a policy expert with the National Employment Law Project, said. "They really do serve their purpose of averting layoffs."
02/14/2011 2:23 PM EST
Agency Spending Proposed By Obama For 2012
The Associated Press reports:
Here are the spending levels proposed by President Barack Obama for each federal agency in his 2012 budget. All totals are in billions of dollars. Because Congress has not completed action on 2011 spending legislation, the administration used the president's 2011 budget request as the basis for the 2011 spending estimates for each agency.
Department; Total 2011; Total 2012; % Change From 2011.
Agriculture 147.8 145.6 -1.5
Commerce 9.2 10.4 13.9
Defense 772.1 727.4 -5.8
Education 49.1 68 38.5
Energy 31.2 27.2 -12.7
EPA 9.9 8.8 -11.2
Health and Human Services 895.6 886.8 -1.0
Homeland Security 43.5 44.3 1.8
Housing and Urban Development 55.9 47.2 -15.5
Interior 12.4 11.8 -4.4
Justice 32.6 31 -5.1
Labor 149.5 108.8 -27.2
State 74.2 73.6 -0.7
Transportation 76.5 128.6 68.1
Treasury 467.3 520.3 11.4
Veterans 123.4 129 4.5
Social Security 803.1 818.3 1.9
NASA 18.9 18.7 -0.9
Legislative Branch 4.8 5.2 6.9
Judiciary 7.3 7.6 4.3
Army Corps of Engineers 4.9 4.6 -6.1
Other Agencies 120.7 131.5 8.9
TOTAL 3,651 3,685 0.9
02/14/2011 1:40 PM EST
New Housing Budget 'A Rearranging Of Deck Chairs On The Titanic’
Laura Bassett reports:President Obama’s 2012 budget managed to increase funding to homelessness assistance programs by $577 million, despite an overall cut of 2.5 percent to the Department of Housing and Urban Development. It did so at the expense of housing programs designed to prevent homelessness in the first place.
Although the housing crisis is far from over, HUD will have about a billion dollars less to spend on homelessness and housing programs in FY 2012 than it did the previous year. The Federal Strategic Plan to End Homelessness will receive an increase in funds that will allow it to assist approximately 78,000 new homeless families, but funds will be slashed for housing programs for seniors and the disabled, as well as for the Community Development Block Grant Program, which builds and rehabilitates affordable housing.Jeremy Rosen, policy director for the National Law Center on Homelessness and Poverty, told HuffPost that in light of the affordable housing cuts, “it’s an open question” whether the new budget will have “any net affect on homelessness.”
“I think it's a rearranging of deck chairs on the Titanic, so to speak, because we're saying, ‘Okay, we're gonna provide a little bit more money to people who are homeless by taking it away from housing programs that stop people from falling into homelessness,'” he said. “We're obviously in a housing crisis, so a budget that cuts a billion dollars is not going to really make meaningful steps toward addressing that.”
One program that was completely left out of HUD’s 2012 budget, the Homeless Prevention and Rapid Re-Housing Program, was already having trouble keeping up with demand in 2010, according to a recent NLCHP report.
The program, which helps keep people in their apartments by subsidizing their rent, will likely run out of money in most states before the end of 2011 without additional HUD funding.
“That’s a big loss, because this is a program that’s been working and that’s greatly needed,” said Maria Foscarinis, executive director of NLCHP. “The need hasn’t abated so it will just mean that fewer people will be helped.”
Foscarinis told HuffPost she is disappointed in the Obama administration’s priorities.
“I'm disappointed in the administration and ultimately the president for not standing up for the needs of poor people and middle-income Americans who are suffering now in the this time of crisis. I think this is paying the price for having given the tax breaks to the people who didn't need them and for not speaking out in favor of sensible budget priorities.”
02/14/2011 12:46 PM EST
Obama Calls For Funding Increases For Refugee Programs
Elise Foley reports:
One bright spot for refugee assistance in the president’s budget: Obama called for a $28 million increase in funding for refugee and entrant assistance, plus a $17 million increase for grants to non-governmental organizations that help refugees adjust to life in the United States. Current funding for refugees is dangerously low, which critics say shirks the government’s responsibility to take care of the suffering victims it accepts into the country.
The United States is authorized to admit up to 80,000 refugees for fiscal year 2011. As the United States has begun accepting fewer refugees, sources who work in refugee resettlement said the refugees who are accepted have experienced the worst of the worst: most have experienced major traumas or injuries, making it more difficult for them to fend for themselves once they enter the country.
The government provides funds directly for refugees’ first three months in the United States through the State Department, which would be given an additional $27 million under Obama’s budget for refugee admissions. Other funding increases would go to the Office of Refugee Resettlement, part of HHS, for entrant assistance and grants. Those grants provide long-term support for refugees, who must find work and become self-sufficient quickly to avoid homelessness when their government aid runs out.
The United Nations Refugee Agency estimated there were 10.3 million people in need for refuge worldwide at the beginning of 2011. Because many countries are cutting down on the number of refugees they accept each year, many people seeking refuge spend years -- even decades -- living in camps with little access to education and medicine.
02/14/2011 12:21 PM EST
Obama Wants Additional Funding For Homeless Vets, GOP Proposes Cutting Program
Amanda Terkel reports:
President Obama's FY 2012 budget provides $939 million to "continue the expansion of VA services for homeless and at-risk veterans. These funds will combat veteran homelessness through collaborative partnerships with local governments, non-profit organizations, and the Department of Housing and Urban Development, the Department of Justice, and the Department of Labor."
In contrast, the Republicans' "continuing resolution" proposal would cut $75 million from a joint program with the Departments of Veterans Affairs (VA) and Housing and Urban Development (HUD) that offers housing vouchers to homeless veterans, effectively killing the program.
In a press release last week, House Appropriations Committee Ranking Member Norm Dicks (D-Wash.) criticized the elimination of this program:
The fact that this absolutely critical program was placed on a list of expenditures to be terminated in the Republican budget is indicative of how thoughtless and insensitive the process became after the most conservative members demanded further cuts in a budget that would already have caused tremendous harm and dislocation throughout the country.
As long as there are veterans sleeping in shelters, cars, under bridges and on the streets, we have an obligation to continue to increase this voucher program.
According to a new analysis by the VA and HUD, "on a single night in January 2009, 75,609 veterans were homeless, and an estimated 136,334 veterans spent at least one night in an emergency shelter or transitional housing program between Oct. 1, 2008, and Sept. 30, 2009."
02/14/2011 12:00 PM EST
Obama Calls For Cuts To Democracy-Promoting Programs
Elise Foley reports:
Amid the tumultuous revolutions in Tunisia and Egypt, Republicans have criticized President Barack Obama for failing to adequately support organizations that seek to foster democracy abroad. Obama's proposed 2012 budget gives those critics a fresh talking point, calling for further cuts to such programs.
Under Obama's proposal, released Monday, the State Department's Democracy Fund would be cut by 21 percent from its current $140-million appropriation, leaving it with $111 million for fiscal 2012. Subsidies for the National Endowment for Democracy, a private nonprofit that focuses on spreading democracy, would be cut by 12 percent, from $118 million to $104 million.
Read the full story here.
02/14/2011 11:57 AM EST
Obama Plans Modest Tax Hikes on Wall Street, Oil Companies and The Rich
Zach Carter reports:
The budget plan released Monday by President Barack Obama includes two modest tax increases on large financial institutions and oil companies, along with hikes targeting the wealthiest Americans.
The budget projections included in the proposal would allow the Bush tax cuts on the wealthy to expire in 2013, with the estate tax returning to higher, 2009 levels. Obama renewed the Bush tax cuts, along with a low estate tax, in a December compromise with Congressional Republicans to extend unemployment benefits. The deal was estimated to increase the federal budget deficit by $858 billion, with just $56 billion of the total attributable to unemployment benefits. Obama has repeatedly insisted he will not allow the Bush tax cuts to be extended again in 2012.
The largest tax hike proposed for this coming year targets wealthy individuals. Obama hopes to raise about 1 percent of GDP, or roughly $150 billion, by limiting the amount that the rich can deduct from tax bills for things like charitable deductions and mortgage interest. This revenue would be used to provide a three year “patch” on the alternative minimum tax, or AMT. Patching the AMT prevents taxes from going up on the middle class. Congress typically passes a one-year patch every year.
Obama also remains committed to imposing a special tax on the nation’s largest banks, but has dramatically curtailed the scope of that tax. Under the plan, the yet-to-be-enacted bank tax would shrink from $90 billion to $30 billion.
Obama first proposed the bank tax in January 2010 as a way to recoup losses from the Troubled Asset Relief Program. The 2008 bailout law requires the president to put forward a proposal to recoup any losses from financial industry, but does not require Congress to adopt the proposal. In January 2010, the administration projected a shortfall of $114 billion under TARP, and Obama proposed a plan to bring in $90 billion over 10 years, with plans to extend the program longer to continue recouping funds.
Today, the administration projects a $46 billion loss on TARP, and is pushing a $30 billion tax. The tax would apply only to banks with $50 billion in assets or more.
Critics of TARP accounting emphasize that bank losses have been pushed into other programs, like rescue of Fannie Mae and Freddie Mac, plus new refinancing programs in the Federal Housing Administration and the Department of Veteran’s Affairs. The administration currently expects the Fannie and Freddie rescue to cost $73 billion through 2021.
Other proposals to impose heavier taxes on Wall Street have been ignored by the White House. One analysis from the Center for Economic Policy and Research found that a very small tax on trades of stock and derivatives would raise about $150 billion every year, even if trading volume declined substantially.
The administration has not seriously fought for the bank tax since Obama rolled out the proposal in January 2010. The plan briefly resurfaced last summer during the fight over the Wall Street overhaul, when Sen. Scott Brown (R-Mass.) balked at a plan that would require Wall Street to pay for the bill’s new, beefed up regulatory oversight. To keep progressives from revolting on a compromise with Brown, the Obama administration promised to pursue the bank tax.
Obama also hopes to eliminate roughly $4 billion in annual federal subsidies for oil and gas companies.