White House plans to address nation’s record $1.6 trillion deficit, hoping to cut $250 billion after 10 years

Gautham Nagesh Contributor
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The nation’s deficit is set to rise to $1.6 trillion under the budget for 2010 that President Obama will unveil Monday, forcing the White House to vow that it is devoted to bringing the imbalance under control.

The White House said Sunday that even though the deficit goes up from its $1.4 trillion level this year, its budget plan brings it down to $792 billion in 2015. However, the calculations are based in large part on measures that must be approved by Congress, and which are by no means a certainty.

The administration’s short-term plan for tackling the deficit relies heavily on the proposed cap on non-defense discretionary spending. House Speaker Nancy Pelosi, California Democrat, has said she is not necessarily in favor of the spending freeze unless it includes defense spending. The White House has already dismissed her suggestion and said Sunday that President Obama is willing to use his veto to enforce the cap, adding fuel to what is already sure to be a contentious budget cycle.

“We wanted to draw a line in the sand and enforce some discipline in the spending process,” White House spokesman Dan Pfeiffer said. The administration forecasts that the budget deficit will recede slightly in 2011 to $1.3 trillion or 8.3 percent of GDP.

But Rep. Paul Ryan, Wisconsin Republican and the ranking member of the House Budget Committee, said that “the administration will attempt to focus attention on a handful of proposals supposedly aimed at tempering the federal government’s explosive growth.”

“But these have far more to do with calming Americans’ concerns than with doing anything to address them,” Ryan said.

To deal with the long-term deficit, Obama will create a bipartisan commission on deficit reduction through executive order after Congress rejected a similar proposal last week. The commission will be tasked with addressing the structural issues affecting the budget, but will only have the power to make suggestions that would not be binding.

The White House is counting on getting another $90 billion through the bank tax Obama proposed during his State of the Union speech, though that would have to be passed by Congress first.

The proposed cap on discretionary spending is controversial because it preserves spending at elevated fiscal 2010 levels and does not apply across the board, so individual programs may see their funding rise or fall.  The structure of the cap also allows the White House to redirect billions used for the 2010 decennial census into other programs without increasing total discretionary spending.

The White House is proposing increasing discretionary spending in several areas including significant boost for education, energy research and extending the Bush tax cuts for the middle class. The Pell Grant program, for example is expected to see a $17 billion boost in spending while civilian research and development would see a 6 percent increase.

Areas facing cuts include the advanced earned income tax credit and approximately 120 government programs, including NASA’s Constellation program, which would be canceled. Subsidies for fossil fuels, grants programs for the National Park Service and payments to states to clean up abandoned coal mines are also on the chopping block.

In total the administration expects to shave $250 billion off of the federal deficit over a ten-year period through these measures, a figure most budget experts consider a drop in the bucket.

While the spending cap is a signal from the administration that they are moving to address spending in the short-term, Budget director Peter Orszag acknowledged that the move would do little to affect the long-term budget deficit, which is driven primarily by the rapidly increasing cost of health care.