Obama's proposed budget spending freeze sparks concern, guesswork

By Alec MacGillis and Amy Goldstein
Washington Post Staff Writer
Wednesday, January 27, 2010; A08

Obama's domestic policy agenda, which defined him as a president seeking to restore faith in government, is imperiled by his call for a "freeze" on spending, many advocates said Tuesday, as federal agencies scrambled to determine the proposal's impact.

The freeze would hold steady for the next three years the government's discretionary budget -- the portion of spending that Congress decides every year -- except for spending on the military, homeland security, the State Department and Veterans Affairs.

Although discretionary spending encompasses a wide swath of programs, it amounts to a relatively small proportion of the federal budget, about $450 billion out of $3.5 trillion, with the vast majority of spending devoted to entitlement programs such as Medicare and Social Security and to the military.

Administration officials say it makes sense to rein in spending to signal that they are serious about deficit reduction, and they note that they are still supporting a new jobs bill, a short-term stimulus initiative that would buttress the $787 billion package passed a year ago.

"We're taking common-sense steps that every family and small business takes with their budgets," said Rob Nabors, deputy director of the Office of Management and Budget. "And to make sure that we are spending money wisely, we're going to be ending programs that don't work, we're streamlining those that do, and we're cracking down on special-interest access."

Liberal advocates disagreed. It makes no economic sense, they said, to rein in spending amid a weak recovery. The freeze, they added, could shortchange areas the president has identified as paths for growth, such as energy and infrastructure. And, they argue, it adopts the Republican viewpoint that the deficit is driven by discretionary spending, a mind-set that makes it harder, not easier, to pass a jobs bill.

"It's bad policy and bad politics," said Robert Borosage, co-director of the Campaign for America's Future, a left-leaning advocacy group. "It doesn't make sense in terms of the deficit because it's much too small to make a difference. It simply sugarcoats and teaches the wrong lesson. The president who began with an adult conversation with Americans that health care is the source of the deficit is now having a disingenuous conversation with them."

Budget speculation

Administration officials say the freeze would apply to the total discretionary budget, so that some programs would be allowed to grow while others were cut. Both government officials and outside advocates are trying to divine where the ax will fall hardest in the budget Obama is to release next week.

James R. Horney, director of federal fiscal policy for the left-leaning Center on Budget and Policy Priorities, said a hint of what Obama may cut can be gleaned from his first budget. Although the proposals were rejected by Congress, last year's budget would have curbed Commerce Department subsidies to promote specific industries and to bring products to market, while increasing taxes on profits that corporations earn overseas.

Horney predicted that the administration will widen its efforts to rein in federal help for corporations. Conversely, he said, he will be "very surprised" if the budget does not try to boost programs that serve low- and moderate-income Americans.

Many assistance programs, including Medicare, Medicaid and food stamps, are immune from a freeze because they are entitlements, in which the government must help all who qualify. Still, many social programs are not immune, including most job training sponsored by the Labor Department, the Housing and Urban Development Department's public housing and rent subsidies, and federal grants to states to help provide food for pregnant women, mothers and young children.

Education advocates hope federal aid for schools will be protected, given how much Obama has emphasized the issue.

But a domestic spending freeze may complicate Obama's efforts to expand grants for innovations such as charter schools and teacher performance pay. Congress is heavily committed to distributing billions of dollars each year through formulas to help states pay for special education and programs for disadvantaged students. In addition, federal stimulus aid is tailing off even as states face mounting budget shortfalls.

"If there's no more federal money, it starts becoming extremely difficult to achieve all these far-reaching, important reforms the administration wants to accomplish," said Joel Packer, director of the Committee for Education Funding, which represents dozens of education groups.

Federal education officials were sanguine. "When the proposed budget is released on Monday, it will show that education remains a high priority for the administration," said Assistant Education Secretary Peter Cunningham.

There's still the stimulus

Some advocates took comfort in the fact that stimulus money will continue flowing, no matter what the budget holds.

But John R. Seffrin, chief executive of the American Cancer Society, said that as beneficial as the $10 billion in stimulus funding for the National Institutes of Health has been, flat funding in the regular budget would hurt.

"The whole issue with cancer research is that it has to be a sustainable, uninterrupted level of support," he said.

A freeze could exacerbate the severe fiscal difficulties confronting many cities and states. States and municipalities rely on dozens of discretionary programs, such as public housing subsidies and community block grants. "This is not something that state budgets are in a position to just roll with," said Marcia Howard, director of Federal Funds Information for States. "It will be jarring."

Food-safety advocates worry that it would set back efforts to improve inspections at the Food and Drug Administration and at the Department of Agriculture.

But other advocates and lobbyists had less to worry about, given that their funding streams are not considered discretionary. Pat Wolff, a budget specialist with the Farm Bureau, said the organization is not worried about cuts in agriculture subsidies, since most payments to farmers are entitlements.

"Many farmers in this country are in crisis," she said. "It's not the time to even be thinking about cutting back."

Staff writers Nick Anderson, Spencer S. Hsu and Lyndsey Layton contributed to this report.

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