Obama budget seeks to balance cuts, investments in nation's future

By Michael A. Fletcher and Ed O'Keefe
Washington Post Staff Writer
Sunday, January 31, 2010

In his budget proposal for the coming fiscal year, President Obama will call for increasing federal spending in areas he deems crucial to the nation's long-term economic growth by boosting education funding and raising spending on civilian research by 6.4 percent, White House aides said.

The New York Times reported Saturday that the overall proposal will total $3.8 trillion. Administration officials declined to comment on the report. It was not clear what deficit would be associated with the spending plan. This fiscal year's federal budget is $3.6 trillion.

Aides said the proposal will include $25 billion in emergency aid for states, most of which are contemplating deep cuts to close huge budget gaps. At the same time, the White House said Saturday that the proposal will target 120 federal programs for reduction or elimination, saving an estimated $20 billion.

The president's budget for the fiscal year beginning in October will attempt to walk a fiscal tightrope: increasing support for the still-shaky economy and investing in growth, even as Obama begins chipping away at the nation's huge budget deficit.

Obama last week proposed a three-year freeze on non-security discretionary spending, a move that would generate modest savings but send a powerful political signal. The freeze, a critical component of Obama's deficit-reduction strategy, would affect just 17 percent of the overall federal budget but would touch many of the domestic programs that Obama's Democratic allies in Congress strongly support.

Speaking in his weekly radio and Internet address Saturday, Obama said cutting budget deficits is crucial to continuing the nation's nascent economic recovery. The government reported Friday that the economy grew at an annual rate of 5.7 percent in the final three months of 2009 -- the sharpest increase in more than six years.

In the address, Obama touted another key component of his effort to curb deficits: his plan to create a commission charged with recommending ways to reduce the deficit, including by making cuts in huge entitlement programs such as Medicaid and Medicare. And he called for the reinstatement of "pay-as-you-go" rules, in place in the 1990s, requiring that the cost of new federal programs or tax cuts be offset by tax increases or cuts to other programs. "Reinstating this law will help get us back on track, ensuring that every time we spend, we find somewhere else to cut," Obama said.

The proposed cuts to the 120 programs, announced Saturday on a White House blog, include ending the advance Earned Income Tax Credit, which the White House said was ineffective and used by only 3 percent of eligible taxpayers. Plans also call for merging 38 Education Department programs considered ineffective or redundant by the White House into 11 new similar programs.

The administration also hopes to end to the National Park Service's Save America's Treasures and Preserve America grant programs, a small brownfield cleanup program run by the Department of Housing and Urban Development and an abandoned mine payment program operated by the Interior Department.

Of those programs -- the others were not identified in the blog post -- the White House tried and failed to cut all but the National Park grant programs in its last budget proposal.

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