Thursday, May 7, 2009

Obama Proposes Saving $17 Billion by Cutting Programs

President Barack Obama urged Congress to cut almost $17 billion in programs, including tax breaks for oil and gas companies, while seeking an $81 billion increase for his domestic agenda.

In a 1,374-page document released today, Obama proposed abolishing preferential tax treatment for the two industries as part of a package of 121 federal programs the administration wants to eliminate or reduce.

Obama filled in the details of the budget outline the administration released Feb. 26 that has already been adopted by Congress. The new items are mainly areas where Obama is seeking cuts, which some lawmakers said weren’t enough to begin reducing a deficit that the Congressional Budget Office projects will reach $1.38 trillion in fiscal 2010, the second-highest ever.

“These savings, large and small, add up,” Obama said in remarks after the release of the budget documents. “And this is just one aspect of the budget reforms and savings we are seeking.” Obama repeated his pledge to cut the deficit in half by the end of his term in 2012.

TARP Money

The budget maintains the $250 billion “placeholder” request made in February in case U.S. banks need a further cash infusion under the Troubled Asset Relief Program, budget chief Peter Orszag said in a conference call with reporters. Overall, the budget seeks an $81 billion increase in spending, to $1.30 trillion for the domestic budget, the Congressional Budget Office said.

Unlike past years, the administration won’t release until May 11 its “analytical perspectives” or “historic tables” that help explain its spending decisions and put them in context.

Even with the proposed cuts amounting to only about one- half of 1 percent of the total budget, Obama is confronting resistance to them in Congress and from interest groups seeking to keep alive favored programs. Some of the proposed cuts, such as farm subsidies, already have been rejected by Congress. In 2008, then-President George W. Bush, working with a Democratic Congress, proposed ending or reducing 141 federal programs. Of those, 29 were terminated or trimmed for a savings of about $1.6 billion.

“None of this will be easy,” Obama said. “For every dollar we seek to save, there will be those who have an interest in seeing it spent.”

Republican Reaction

Republicans denounced Obama’s package of cuts and said they’d send the White House a list of their own for consideration.

“The administration’s proposed cuts, while welcome, don’t go far enough, and they appear to be a diversionary tactic -- an effort to change the subject away from the unprecedented debt this budget heaps on future generations,” House Republican leader John Boehner of Ohio said in a statement.

“You’re taking a little teaspoonful of water out of the ocean while you’re dumping a whole river in,” Republican Senator Judd Gregg of New Hampshire said.

Senator Kent Conrad, the Democratic chairman of the Budget Committee, said lawmakers “shouldn’t lose sight of the far larger threat” to the U.S. budget from the soaring costs of health care, which are rising about 8 percent a year, according to the Congressional Budget Office.
‘Looming Challenges’

At the White House, Obama answered critics, saying: “What we are proposing today does not replace the need for large changes in non-discretionary spending.”

Though the White House is trying to focus public attention on cuts, federal spending is on the rise. The blueprint Congress adopted last week provides for a 9 percent increase in domestic discretionary spending and a 4 percent increase for defense.

In his proposal affecting the oil and gas industry, Obama said he would “cut unjustified tax loopholes” by repealing various preferences covering marginal wells, drilling costs and manufacturing deductions, among other benefits.

If approved by Congress, the industry would be placed on the same tax footing as other companies. The repeal would take effect Jan. 1, 2011.

Half of Obama’s proposed savings come from defense programs and half from areas outside the Department of Defense. Some program cuts or terminations were announced earlier.

Yucca Mountain

The administration proposes saving $91 million by eliminating funding for plans to store nuclear waste at Yucca Mountain in Nevada. “The nation needs a better solution than the proposed Yucca Mountain repository,” the document says. The budget plan requests $197 million to explore other options for disposing of the material.

The administration proposes beginning in 2011 to pare a terrorism risk insurance program created after the Sept. 11 attacks which it called an “excessive federal subsidy” to private insurers. That would generate $21 million in savings that year and a total of $263 million by 2014.

The budget seeks $533.8 billion for the Defense Department, excluding war costs, reflecting a 2 percent real increase when adjusted for inflation. That compares with an average 4 percent annual real increase under Bush.

Among the defense programs that would be cut or canceled are those managed by Lockheed Martin Corp., Boeing Co., General Electric Co. and Rolls Royce Plc, among the world’s largest makers of military engines.

Obama is making good on his promise to scrap plans for a new presidential helicopter, for which Lockheed was the main contractor. The budget called for the elimination of the program to upgrade so-called “Marine One” because it is six years behind schedule and its cost has ballooned to more than $13 billion from previous estimates of $6.5 billion.

The president proposes creation of a $5 billion national infrastructure bank to fund large projects such as renovating roads, bridges and waterways, fulfilling a campaign pledge. He also would provide a 60 percent boost to EPA programs to improve drinking water and wastewater treatment plants nationwide.

The president wants to cut $4 million in funds used to help monitor union spending and shift the money to programs that provide workplace safety and wage protection for workers.

Obama proposed an 8 percent increase in the IRS’s budget, to $12.1 billion. Most of that would be a $400 million increase in resources devoted to tax law enforcement, including the hiring of 800 new revenue agents to pursue scofflaws. The administration estimated the new employees and resources would collect an additional $2 billion in revenue by fiscal 2012.

Carmaker Loans

The U.S. Energy Department will issue $10 billion in loans this year to carmakers and car-parts suppliers and $15 billion more next year, according to the budget documents. The $25 billion loan program was authorized in 2007 legislation to support development of more efficient vehicles. General Motors Corp., Ford Motor Co. and Chrysler LLC have all applied for funding. No loans have yet been issued.

The Environmental Protection Agency would spend 60 percent more money to improve drinking water and sewage treatment plants, according to the budget documents.

The administration’s budget for the Health and Human Services Department calls for spending $1.72 billion over five years “to fight health-care fraud and reduce improper payments.” The new spending will save $2.67 billion, according to the budget proposal.

Physician Payments

It also assumes that Congress will halt the scheduled cut in payments from Medicare to physicians. Obama proposed setting aside $11.7 billion to maintain doctors’ fees at their current level in fiscal 2010.

The Food and Drug Administration budget would increase 14 percent in fiscal 2010 to $3.04 billion. Food producers and generic drug manufacturers would pay fees for the first time to have the FDA inspect their goods, according to the budget document.

The Democratic-controlled Congress adopted a $3.55 trillion outline for the 2010 budget that embraces Obama’s top agenda items, including a health-care overhaul, a push for renewable, clean-energy sources and changes in education funding.