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Author Topic: President Obama Unviels new Budget, bets until he caves to GOP
Blayne Bradley
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http://www.washingtonpost.com/wp-dyn/content/article/2011/02/14/AR2011021400906.html?hpid=topnews

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President Obama rolled out a $3.7 trillion budget blueprint Monday that would trim or terminate more than 200 federal programs next year and make key investments in education, transportation and research. The plan is aimed at boosting the nation's economy while reducing record budget deficits.

In a news conference at a Baltimore County middle school, Obama cast the document as a responsible alternative to the deep spending cuts that Republicans will urge in a vote this week on the House floor. Obama's plan would trim domestic spending by hundreds of billions of dollars over the next decade, striking hard at programs long favored by Democrats to make room for targeted increases in energy and medical research, corporate research and development and a new network to bring high-speed Internet access to 98 percent of Americans.

However, Obama also would rely heavily on new taxes, to a degree unacknowledged by administration officials in recent days. His budget request calls for well over $1.6 trillion in fresh revenue over the next decade, much of it through higher taxes on the wealthy and businesses.

Households with income of more than $250,000 a year would immediately see new limits on the value of their itemized deductions. And starting in 2013, they would lose the lower tax rates and other breaks that were enacted during the George W. Bush administration and recently extended.

The president proposes to hit businesses with an array of proposals he has offered in the past, including an end to subsidies for oil and gas companies, new taxes on hedge fund managers and a $30 billion fee on financial institutions aimed at repaying taxpayers for the federal TARP bailout.

The cuts target defense, heating assistance and community development grants and include a scale-down of the Pell grant program for college and vocational students.

The announcement was Obama's opening argument in what is likely to be months of debate with congressional Republicans who want to see deeper cuts.

He cast the reductions as necessary but also said that more funding for scientific research, innovation and education were essential to keep American competitive with other nations.

"It would mean cutting things that I care deeply about," Obama said. "But if we're going to walk the walk when it comes to fiscal discipline, these kinds of cuts will be necessary,"

He said that "while we are absolutely committed to working with Democrats and Republicans to find further savings ... we can't sacrifice our future in the process."

Obama described his education initiatives as "investments in the future" and said he would fight for more funding.

Although Obama seeks an overhaul of the corporate tax code to lower the 35 percent rate on corporate profits, his budget does not make that costly adjustment. Instead, it offers previous proposals to eliminate tax breaks for corporations that do business overseas, reaping $129 billion in new revenue through 2021.

Obama also directs Congress to develop a plan to pay for a new, multi-year transportation bill, a measure traditionally funded by increasing the federal tax on gasoline. "Bipartisan financing" for the transportation trust fund is likely to add another $328 billion to the revenue tally, raising total tax hikes in Obama's budget request to nearly $2 trillion through 2021.

The request drops one major proposal from previous budgets: Obama's plan to develop a system of tradeable vouchers for greenhouse gas emissions. The measure, which passed the House, came under fierce attack from the GOP and the industry and was never taken up by the Senate.

Obama's deficit-reduction strategies would do little to improve the immediate budget outlook. Obama projects that the deficit will hit a record $1.6 trillion this year - which, at nearly 11 percent of the economy, would be the largest since World War II. The bigger wave of red ink is caused in part by the recent bipartisan tax deal, which reduced payroll taxes this year for virtually every working American.

The annual deficit would recede to $1.1 trillion next year, as Obama's latest policies began to take effect - the fourth straight year of trillion-dollar deficits. Obama projects that the deficit would fall rapidly thereafter, settling around $600 billion a year through 2018, when it would once again begin to climb as a growing number of retirees tapped into Social Security and Medicare.

All told, Obama estimates that the nation would have to borrow an additional $7.2 trillion through 2021 under his policies, an improvement from previous projections that exceeded $9 trillion. His plan calls for annual deficits - and therefore annual borrowing - to stabilize at about 3 percent of the economy for much of the decade. The national debt would then level off at about 76 percent of economy, nearly double the debt burden the nation carried before the recent recession.

However, those figures are based on the assumption that the economy will grow 4 percent in 2012 and 4.5 percent in 2013 - well above most private and governmental projections.

Obama said the document represents a pivot toward fiscal responsibility after two years of increased spending to stabilize the ravaged economy.

"Now that the threat of depression has passed, and economic growth is beginning to take hold, taking further steps toward reducing our long -term deficit has to be a priority, and it is in this budget," Obama wrote. "We will not be able to compete with countries like China if we keep borrowing more and more from countries like China."

But Republicans blasted the document as a bait-and-switch, saying it fails to live up to recent assertions by White House budget director Jacob Lew that Obama would reduce deficits primarily by cutting spending.

"What we have here is a total abdication of leadership and talking points based on gimmicks and cooking the books," House Budget Committee Chairman Paul Ryan (R-Wis.) said in an interview. "To me, it's more than disappointing. I expected more taxes, but I also expected some serious spending controls or reforms, and we're getting none of it."

Although the budget request offers an important glimpse of the president's priorities - his first since Republicans regained control of the House in November - it is unlikely to have much influence in the budget debate on Capitol Hill. House Republicans plan to offer their own spending proposal for fiscal 2012, after attempting to push through sharp and immediate cuts to spending this year.

Democrats, who control the Senate, have vowed to block the GOP cuts, setting the stage for a battle that could shut down the government unless the two sides can agree by a March 4 deadline. For next year's budget, Senate Democrats are more amenable to Obama's approach. But they, too, are pursuing a bolder budget strategy in hopes of striking a bipartisan compromise that would go further to solve the nation's long-term problems.

"If we're going to get this debt down to a level that's sustainable, then we've got to do substantially more than $1 trillion worth of deficit reduction in the next decade. We just do," said Senate Budget Chairman Kent Conrad (N.D.).

A senior administration official said Obama's budget request maps "a sustainable path" that would stabilize government finances in preparation for a broader debate about how to tackle the biggest drivers of future deficits: Social Security and health care for the elderly, as well as a tax code that offers more in breaks and deductions than it collects in revenue.

Obama's budget makes clear that he will not take the lead in that debate: It contains no specific recommendations for tax or entitlement reform.

Senior administration officials pointed to two significant changes that would improve the budget outlook by eliminating long-standing gimmicks Congress has used to hide the true depth of the red ink. The first would cover the cost of adjusting Medicare to ensure that payments to physicians are not subject to steep reductions. The second would pay for adjustments to the alternative-minimum tax to prevent it from striking deep into the middle class over the next three years.

And with Republicans unwilling to consider changes in tax policy as part of their deficit-reduction effort, Obama challenges them to reconsider. If Congress would permanently fix the AMT, or pay for its provisions, after 2014, the nation's debt would start to shrink as soon as 2015.

The budget plan offers challenges for Democrats, as well. With voters clamoring for less spending, Obama is proposing cuts that many of his colleagues in Congress will find painful, lawmakers said.

A five-year freeze on domestic programs would reduce spending in that category to the lowest level, measured against the economy, since President Dwight D. Eisenhower left office in 1961. Half of all agencies would see their budgets reduced.

Among the cuts: Community development block grants would lose $300 million; low-income heating assistance would be sliced in half; a Great Lakes Restoration initiative would lose 25 percent of its funding; $1 billion would be cut from large airport grants and nearly $1 billion would be trimmed from a fund that finances water treatment plans and other infrastructure projects.

Nearly 40 duplicative or inefficient education programs would be condensed into 11, and 13 more would be eliminated. Sixty duplicative transportation programs would be consolidated into five, and limited to making investments only if Congress agrees on a financing plan that would not increase the deficit.

The Pentagon would also take a hit of $78 billion over the next five years, and defense spending would increase only for inflation thereafter. Combined with the drawdown in Iraq, overall military spending would be cut by 5 percent in 2012, compared with Obama's fiscal 2011 request.

On Sunday, a senior White House official pointed to a trade-off that he called emblematic of the administration's efforts: a plan to scale back portions of the Pell grant program, a key initiative of the Obama administration, to cover the growing cost of providing a maximum $5,550 benefit to more than 9 million eligible students.

Republicans attacked the blueprint based on early reports, saying it would do too little to satisfy the public hunger for smaller government.

"The president talks like someone who recognizes that spending is out of control, but so far it hasn't been matched with action. And his only solution to one of the most significant problems facing our country is to lock in spending at levels we all know are completely unsustainable," Senate Minority Leader Mitch McConnell (Ky.) said in a statement. "Americans don't want a spending freeze at unsustainable levels. They want cuts, dramatic cuts."

Democrats defended the president.

Obama's budget blueprint "strikes the right balance, offering tough cuts in a responsible manner," said Rep. Chris Van Hollen (Md.), the senior Democrat on the House Budget Committee. "Compared to the slash-and-burn Republican approach, this budget positions the president as offering a responsible approach to deficit reduction."


Predictably enough the Republicans throw a hissy fit.
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SoaPiNuReYe
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Well, I wouldn't call it caving as much as being stonewalled long enough for the Republicans to propose a virtually identical budget.
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BlackBlade
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I'll see your WP article and raise you one opinion piece.
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Lyrhawn
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Obama could have called for the elimination of the corporate income tax and and end to all income tax and the Republicans would have found a way to complain about it. They were always going to throw a hissy fit no matter what he did.

This is all just political theater. Both sides are trying to solve a trillion dollar problem by playing with 10% of a $4 trillion budget. Obviously it's not going to balance the budget. That's absolutely impossible without fixing entitlements and slashing military spending, and Republicans have already declared those things off-limits.

I can't WAIT to see the GOP budget. They're going to have to create some new kind of math to actually accomplish the things they're promising. The budget process has me pretty pissed of. I'm to the point where if I heard there was a march even somewhat close to me, I'd be there with a van full of friends. I'm close to organizing one myself. We're on course to spend half a TRILLION dollars in INTEREST payments in a few years. Just in interest payments! Can you imagine what we could do with a spare half trillion dollars that we're just giving away? And we're not even talking about DEBT reduction, but how to keep the deficit under a trillion? It's absolutely ridiculous. I'm sick of it, and there's no end in sight because both sides keep punting on the issue to try and gain tactical advantages.

I'm sick of the theater, and I'm sick of Americans taking it lying down. And this part really pisses me off:

quote:
On Sunday, a senior White House official pointed to a trade-off that he called emblematic of the administration's efforts: a plan to scale back portions of the Pell grant program, a key initiative of the Obama administration, to cover the growing cost of providing a maximum $5,550 benefit to more than 9 million eligible students.
Yeah, he wants to pay for a permanent extension of the Pell grant program by raising fees on grad students. Essentially, grad students won't be able to defer any of the interest on their loans while they are in school, they'll all be unsubsidized from now on. First off, how can you carp about a lack of highly qualified well-educated students and complain that other countries produce more graduate degree conferees than we do and then turn around and make it more expensive to go to grad school, a place where funding is much more difficult to come by than it is for undergrad? If I end up doing what I want to do with my life, this change will cost me thousands of dollars, and it's not like I'm going into brain surgery or something with my advanced degree. My income potential is less than what a good plumber can make in a year.
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rivka
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Lyr, read what it says again: it says "a plan to scale back portions of the Pell grant program", nothing about Stafford loans (grad or otherwise).

Now, the addition of summer Pell (aka "two Pells in one award year" or "the biggest headache most FA admins have had to deal with in years, even worse than SMART/ACG) was a huge PITA. In some ways cutting it would not be a bad thing, especially if it means we can keep $5550 Pell max for next year (instead of the roughly $4700 the Republicans are proposing). But it IS a step backwards.

(Cutting sub Stafford for grad students is also being suggested, but that's not the Pell proposal. And given that grad students depend more on PLUS than anything else, which has never been subsidized, I think you are exaggerating the effects of such a change.)

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BlackBlade
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Lyrhawn: That really pissed me off as well. As if graduate students are the right place to dip in for those extra funds. Leave them alone while they are in school, and you will get many times your investment in taxes down the road.

I think it's utterly ridiculous that Gates drummed up 3% in cuts for defense, for a military that accounts for about 20% of the total budget last year. And we're expected to believe that is really bleeding the military.

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SoaPiNuReYe
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The military is where the cuts really need to happen. There's so much wasteful spending going on in the Department of Defense, I'm not sure where to even begin. It's disheartening to think about. These guys have been dangling apples in front of Congress' heads since the end of the Cold War with promises of change. All this 'War on Terror' got us was a half trillion dollar defense budget.
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fugu13
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There are a number of cuts the military would be happy to do that Congress refuses to do, particularly base closings and discontinuing expensive (and district-lucrative) weapons programs.
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Mucus
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quote:
Obama projects that the deficit would fall rapidly thereafter, settling around $600 billion a year through 2018 , when it would once again begin to climb as a growing number of retirees tapped into Social Security and Medicare.
Just in time for the next recession!
J/K (or am I?)

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capaxinfiniti
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quote:
Originally posted by fugu13:
There are a number of cuts the military would be happy to do that Congress refuses to do, particularly base closings and discontinuing expensive (and district-lucrative) weapons programs.

this is especially important to point out. base-closings have a dramatic negative impact on the city and state in which the base is located (and country, if youre considering those in foreign nations) and can understandably be very unpopular on a local level. when its the local level electing congressional representatives, you can be sure theyre going to elect officials that will maintain their interests. the civilian contracts alone greatly fuel local economies and industries. job loss, i think, is an even larger concern. closing a base means military personnel will lose their jobs and civilian contractors - and all those that use the base as a crutch for their business - will likely lay off workers and lose revenue, halting growth. a lot of this relates equally to weapons development - jobs, military contracts, etc.

there is a ton of waste in the military - ive seen it first-hand, albeit in a round about way - and i would gladly see some cuts made but many people depend on or at least use the military to acquire an education and often for a livelihood. cutting the defense budget is an unpopular, daunting task but if its done in conjunction with other deficit reducing measures it will produce a much needed relief on the budget.

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Lyrhawn
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quote:
Originally posted by capaxinfiniti:
quote:
Originally posted by fugu13:
There are a number of cuts the military would be happy to do that Congress refuses to do, particularly base closings and discontinuing expensive (and district-lucrative) weapons programs.

this is especially important to point out. base-closings have a dramatic negative impact on the city and state in which the base is located (and country, if youre considering those in foreign nations) and can understandably be very unpopular on a local level. when its the local level electing congressional representatives, you can be sure theyre going to elect officials that will maintain their interests. the civilian contracts alone greatly fuel local economies and industries. job loss, i think, is an even larger concern. closing a base means military personnel will lose their jobs and civilian contractors - and all those that use the base as a crutch for their business - will likely lay off workers and lose revenue, halting growth. a lot of this relates equally to weapons development - jobs, military contracts, etc.

there is a ton of waste in the military - ive seen it first-hand, albeit in a round about way - and i would gladly see some cuts made but many people depend on or at least use the military to acquire an education and often for a livelihood. cutting the defense budget is an unpopular, daunting task but if its done in conjunction with other deficit reducing measures it will produce a much needed relief on the budget.

The ultimate makework job! Republicans should be all over that!
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Blayne Bradley
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Just withdraw from foreign bases, their local jobs and economies arent something that has a direct impact on congressional elections.

Marines, navy, airforce is where the budget is needed for your peacetime, the regular army doesn't need to be kept at the levels they are at.

Figure out what strategic and logistics can be burden shared among allies and discard the excess.

I think the budget is 5.7% of gdp, I think you can honestly if you were willing to be radical enough lower it to 2-3% and still be ahead of Russia's and China's combined totals and force the DoD to economize.

Much of your equipment is still good for the next 30-40 years, you can store alot of your equipment and most of it should still be in working order in an emergency.

Since you won't be able to with that budget maintain the standing volunteer army you will need to reimplement the Selective Service so you can keep a steady and consistent access to qualified personnel and technicians just like how Prussia and the PLA did so.

Any significant radical reductions in spending NEED the draft if you wish to keep up force readiness and quality of the officer corps.

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Parkour
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I think that advice is completely inapplicable to what the U.S. should do for combat readiness. America isn't going to end its standing volunteer army, and it shouldn't.

It also doesn't need to "reimpliment" selective service. Selective service hasn't gone away.

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Blayne Bradley
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You know what I mean, and it should.

Guns n Butter, the US has favoured a national strategy of trying to meet every single one of its defence needs with a policy of trying to be absolutely secure via military force at all times, it is an unsustainable strategic juggling act that combines the worst of both the Soviet and Imperial British national strategies.

You are at the moment you need to significantly dial back the military budget and reinvest into your economy and paying off your debts.

This requires a radical shift in priorities and no matter how I look at it if you significantly dial back defense spending you are NOT going to be able to maintain the same level of force readiness, especially when recruitment falls even further as a societal result.

The point is a simple matter of cause and effect, if you massively reduce the military budget people will have to be let go and once the military seems like a less attractive place to enlist to and is lacking in career advancement less and less talented people will be willing to enlist/enroll.

This will over time severely affect readiness, only the draft to keep up a constant pool of trained reservists, technicians and officers will allows you in a national emergency to call and quickly access that talent.

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Darth_Mauve
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You mention about "during peacetime" but if I remember correctly we are still in one and a half wars (or is it two) at the present. Neither of these appear to be really ending anytime soon.
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Mucus
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Two and half by my count (Iraq, Afghanistan, Yemen)
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Juxtapose
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I rather doubt the costs of the counterterrorism training going on in Yemen constitutes half a war, for budgetary purposes.
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Mucus
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I'm just counting wars, obviously the costs aren't equal between wars. Although, its already been revealed in the Wikileak cables that American involvement in Yemen extends beyond training to air strikes. (And to be consistent, I guess air strikes would include Pakistan as another half, so three wars I guess. So many countries to blow up, sheesh).
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Juxtapose
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Fair enough. Believe me, I think there's a lot more to be said about the war on terror than just counting countries.

But for budgetary purposes, boots on the ground cost a lot more than training and airstrikes.

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Blayne Bradley
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quote:
Originally posted by Darth_Mauve:
You mention about "during peacetime" but if I remember correctly we are still in one and a half wars (or is it two) at the present. Neither of these appear to be really ending anytime soon.

And clearly the solution is to withdraw from those conflicts or heavily reduce presence to be on par with that of other non militeristic non garrison state participants.

Wars should be last resort emergancy challenges that the nation should be geared towards to rapidly meet and defeat and then dissolve said forces once the threat is over, while still keeping the material and personnel capability to rapdily regain that capacity when the next challenge arrives.

Very much like Prussia and the Prussian General Staff.

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Geraine
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quote:
Originally posted by Lyrhawn:
We're on course to spend half a TRILLION dollars in INTEREST payments in a few years. Just in interest payments! Can you imagine what we could do with a spare half trillion dollars that we're just giving away?

Build a high speed rail system?
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rivka
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http://www.fastweb.com/financial-aid/articles/3009-president-obama-proposes-cuts-in-aid-programs-to-preserve-pell-grant
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Blayne Bradley
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1.1 trillion in savings?
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