By Michael A. Fletcher and William Branigin
Washington Post Staff Writers
Monday, April 20, 2009 2:23 PM
President Obama convened his Cabinet for the first time today and instructed department heads to trim their budgets by a combined $100 million over the next 90 days, cuts he said would help overcome a "confidence gap" among the American people about the use of their tax dollars.
Speaking to reporters after the meeting, Obama said the budget cuts would be separate from "programmatic cuts" that his economic team is making by going through the federal budget line by line.
"In the next few weeks, we expect to cut at least 100 current programs in the federal budget so that we can free up those dollars in order to put them to use for critical areas like health care, education, energy, our foreign policy apparatus," he said.
"I'm very pleased about the work that we've done, but we've got more to do," Obama said. "And one of the things that everybody here is mindful of is that as we move forward, dealing with this extraordinary economic crisis, we also have a deficit, a confidence gap, when it comes to the American people. And we've got to earn their trust. They've got to feel confident that their dollars are being spent wisely."
Although the cuts would account to a minuscule portion of the federal budget, they are intended to signal the president's determination to trim spending and reform government, a senior administration official said before the Cabinet meeting.
"We have an obligation . . . to make sure that this government is as efficient as possible," Obama said, citing steps that some government agencies are taking to consolidate, streamline and improve their practices.
"There are a host of efficiencies that can be gained without increasing our personnel or our budget but rather decreasing the amount of money that's spent on unnecessary things in order to fund some of the critical initiatives," Obama said.
"None of these savings by themselves are going to solve our long-term fiscal problem, but taken together they can make a difference, and they send a signal that we are serious about changing how government operates," he said. He added that, cumulatively, the cuts "start setting a tone" and that by making trims "line by line, page by page, a hundred million dollars there, a hundred million dollars here, pretty soon, even in Washington, it adds up to real money."
In a statement issued before the Cabinet meeting, the White House identified a variety of cost-cutting measures it said agencies have already begun to implement, ranging from a crackdown on improper farm subsidy payments by the Agriculture Department to bulk purchases of office supplies by the Homeland Security Department and the use of energy-efficient vehicles.
Obama's order comes as he is under increasing pressure to show momentum toward his goal of eventually reducing the federal deficit, even as he goes about increasing spending in the short run to prop up the economy and support his priorities.
Earlier this month, both chambers of Congress passed Obama's $3.5 trillion budget outline for 2010, which includes unprecedented new investments in health care, education and energy. But the huge budget, which contemplates a $1.2 trillion deficit, has drawn the ire of small-government conservatives who say that the deficits jeopardize the nation's economic future.
Still, Obama said he is serious about reining in deficits over the long term, and some agencies are already moving in that direction, the administration said.
Veterans Affairs has canceled or delayed 26 conferences, opting for less costly alternatives such as video conferencing, saving nearly $17.8 million. The Agriculture Department is working to combine 1,500 employees from seven office locations into one facility in 2011, which the agency said would save $62 million over a 15-year lease term. Also, Homeland Security projects that it can save up to $52 million over five years by buying office supplies in bulk, officials said.
According to the White House, the Agriculture Department is working with the Treasury Department to "identify potential fraud and improper payments in farm programs." Starting with the 2009 crop year, all recipients of farm program payments will be required to grant Treasury the authority to provide income information to the Agriculture Department for verification purposes, it said. Recipients found "out of compliance" would be ineligible for future payments, and savings could reach $16 million a year, the White House said.
Last week, conservative activists organized tea parties to protest Obama's budget, which they say "spends too much, taxes too much, and borrows too much from our children and grandchildren," according to House Minority Leader John A. Boehner (R-Ohio).
"They're really concerned about the amount of spending that's going on in Washington and the amount of debt that is being piled up," Boehner said yesterday on ABC's "This Week." "They know that you can't have trillion-dollar deficits for as far as the eye can see without imprisoning the future for our kids and theirs."
In his radio and Internet address Saturday, Obama repeated his vow for his administration to scour the federal budget "line by line" to reduce spending. During an address to Congress in February, Obama said his administration has identified $2 trillion in deficit reduction over the next decade.
That savings projection, however, rests on a dubious baseline, including assuming that the United States would have retained its current troop level in Iraq for the next decade. The reduction also contemplates expiration of tax cuts for the nation's highest income earners.
While the Obama administration has begun stressing tentative signs of improvement in the economy, it appears likely that some of the nation's largest banks will need additional help, top White House officials said. However, they said, the administration should be able to provide that help without asking Congress for more money.
The Obama administration is moving closer to releasing some results of the "stress tests" aimed at projecting how the nation's largest 19 banks would withstand further deterioration in the nation's economic condition.
"We're confident that, yes, some are going to have very serious problems, but we feel that the tools are available to address these problems," David Axelrod, a senior adviser to the president, said yesterday on CBS's "Face the Nation."
Officials said that the administration should be able to provide additional bailout money if necessary without returning to an increasingly skeptical Congress for further authorizations.
The administration plans to release guidelines for the stress tests this week, and it hopes to make results available in early May. "It's important that there is disclosure," Axelrod said. "And I think the banks are going to want that because they're going to want the markets and the country and the world to know exactly what their condition is."
Obama yesterday wrapped up a visit to Mexico and the island nation of Trinidad and Tobago, where he attended a summit of Caribbean and Latin American leaders. He now will turn his attention back to domestic issues, aides said.
Chief economic adviser Lawrence H. Summers said Obama would back efforts to tighten regulation for credit card companies. Executives from the nation's largest credit card firms have been summoned to the White House for a meeting with administration officials later this week. Meanwhile, members of Congress are pushing legislation to limit the ability of credit card companies to raise interest rates on existing balances, while requiring clearer disclosure of loan terms.
"He's going to be very focused in the very near term on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into," Summers said on NBC's "Meet the Press."
Officials talked cautiously about obstacles impeding a turnaround in an economy that is still shedding more than 600,000 jobs a month amid continued spikes in home foreclosures. But they also pointed to some improvements.
Some major banks have reported profits recently, and there are signs of credit thawing in some corners of the economy, officials have said.
"No one is in any position to declare any kind of victory here," Summers said. "But the fact that no one can declare victory doesn't mean that we shouldn't take note of developments as they unfold. And the developments, as I say, are more . . . mixed now."
In the long run, Summers said, the nation's economy is going to have to become less reliant on borrowing and consumption, even if that is what is needed now to prevent the recession from worsening.
"We're going to need a less leveraged economy," he said. "Individuals are going to have to save more." In addition, government must become "a contributor of savings to the economy, rather than a drain," Summers said.