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Obama's Budget Plan Predicts Record Deficit

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Obama's Budget Plan Predicts Record Deficit

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Obama's Budget Plan Predicts Record Deficit

Obama's Budget Plan Predicts Record Deficit

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The White House Office of Management and Budget Director Peter Orszag provided an overview of the budget plan to be released Monday.

RENEE MONTAGNE, host:

It's MORNING EDITION from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning.

Today, President Obama offers an effort to meet two conflicting goals. One is to spend a lot of money to keep the economy going. The other is to at least start addressing the federal borrowing of breathtaking size.

MONTAGNE: And the budget, just released this morning, offers details to go with the policy proposals that the president outlined in his State of the Union address last week. In this part of the program, we'll have analysis from NPR's Cokie Roberts. That's coming up in a moment.

INSKEEP: We begin with NPR's Andrea Seabrook, who will talk us through with what's known so far.

Andrea, good morning.

ANDREA SEABROOK: Good morning, Steve.

INSKEEP: The president talked about a spending freeze in his speech last week. What does that look like when you actually see the paper?

SEABROOK: Well, a freeze is a little bit of a misnomer. It makes you think that the different departments are actually going to have the same budgets year after year. That's not true. It's really a spending cap. They're taking all of the budget that isn't Medicare, Medicaid, Social Security - okay, that's the mandatory spending - that isn't defense, homeland security and other homeland security sorts of priorities, security priorities.

Okay, take those out. And then the rest of the budget, everything else - health and human services, education, all these other things, and capping the amount of money that's spent on all of that. So, there is actually quite a bit shuffling among those departments. Some will get more, some will get less. And of course, as he said, the reason why is that the administration is estimating the deficit this year, 2010, will hit $1.6 trillion, the worse deficit in history. They expect it will go down a bit to 1.3 next year.

INSKEEP: And I guess we should emphasize, this spending cap, in the way that you describe, only covers, in effect, a small fraction of government spending because those huge programs that are left out are most of the government's budget, year after year after year.

SEABROOK: Yeah, so don't take too much of that. But it is, you know, it's the biggest freeze or stoppage in spending growth that we have had in decades.

INSKEEP: And how else does the administration propose to save money or bring more money in?

SEABROOK: Well, here are the broad contours. He is going to let the tax cuts expire for households making more than $250,000 a year. Those were the tax cuts passed by President Bush and the Republican Congress in 2001, 2003. So, you would keep them if you make less, if your household makes less than $250,000 a year. That actually brings in a lot more money into the federal government, to the tune of $700 billion over 10 years.

He is going to get rid of tax breaks for traditional energy companies, oil, coal, natural gas. He is going to start charging a new fee to the big banks that benefited from the TARP bailout, that's 90 billion over ten years. And he is going to slash, or completely eliminate from the budget, dozens of smaller programs - about 120, the budget says - that the administration has decided are wasteful or duplicative and they want to bring down.

INSKEEP: So, you do all that, and in the short term, you don't seem to get very much, Andrea Seabrook. The budget deficit is projected to go from that 1.6 trillion that you mentioned, down to 1.4 trillion in the next fiscal year. So, what is the administration spending all that money on?

SEABROOK: Well, and let's not forget the OMB, the Office of Management and Budget, says that part of why we are in such a deep hole is the recession itself. That there are stabilizers in the economy and in the budget that keep revenue from coming in when there is no growth, and when the economy kick starts itself again, as they hope it's doing right now, then more revenue will come in. So, they say that's another thing. But they're also spending a lot of money here.

Make no mistake, education gets a huge boost, especially grade school - K through 12 - that's some of the biggest winners in this budget. Biggest jump in spending ever, at least the biggest request. Also a big increase in Pell Grants for college kids. And there is a lot of money for civilian R&D. Now, that sounds like one thing but it's actually a lot of things spread across the economy; research, proposal projects and energy and so on.

The administration calls this their focus on innovation. And there is also the jobs program, giving money to small businesses that hire workers.

INSKEEP: Andrea, in just a couple of seconds, is Congress likely to approve anything like this budget?

SEABROOK: Oh, not really. They have their own ideas about everything, as we learn every year.

INSKEEP: Andrea, thanks very much.

SEABROOK: My pleasure.

INSKEEP: That's NPR congressional correspondent Andrea Seabrook.

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