Weeding the budget of $17 billion
Obama administration proposes cuts in funding for more than 100 federal programs in latest salvo in 2010 budget fight.
NEWYORK (CNNMoney.com) -- President Obama on Thursday offered a moredetailed look at his 2010 budget proposal, which includesrecommendations to cut funding for 121 federal programs and save $17billion in 2010.
"There is a lot of money being spentinefficiently, ineffectively, and -- in some cases -- in ways that areactually pretty stunning," Obama said.
The $17 billion in savingsamounts to roughly 0.5% of the more than $3.5 trillion in spendingapproved for next year, or 1.2% of the projected $1.4 trillion deficitnext year if the president's overall budget is adopted.
Obama said it nevertheless is real money -- even by Washington standards.
"Toput this in perspective, this is more than enough savings to pay for a$2,500 tuition tax credit for millions of students as well as a largerPell Grant -- with enough money left over to pay for everything we doto protect the National Parks," he said.
But it's notnecessarily money that would represent an actual reduction in spending.Rather, it's money that is more likely to be reallocated to otherendeavors - from a program the administration assesses is not workingto a similar program that is.
"The spirit is to eliminateduplication and measure what works and what doesn't and put additionalresources into things that are working," said White House budgetdirector Peter Orszag in a call with reporters.
Roughly $11.5billion of the savings would come from the discretionary side of thefiscal 2010 budget -- that is, for programs whose funding is notautomatic. And roughly half of the savings would come from non-defenseprograms.
The biggest proposed cuts and reductions in the president's budget are defense-related:
- Recruiting and retention adjustments: $6.24 billion
- Future combat systems of manned ground vehicles: $2.98 billion
- F-22 raptor fighter aircraft: $2.9 billion
- Transformational satellite: $768 million
- Joint strike fighter alternate engine: $465 million
In any given year, defense spending typically accounts for more than 20% of the total budget.
Amongthe smaller programs on the president's chopping block are a long-rangenavigation system made obsolete by the GPS (cost: $35 million); anearly education program called Even Start, the performance of which hadbeen poor (cost: $66 million); and a Department of Education attachéposition in Paris (cost: $632,000).
The cuts and reductions are likely to be the first of many to come, the president promised.
A few weeks ago, Obama announced that he had asked his cabinet members to cut $100 million from their agencies' expenses, a number budget analysts characterized as symbolic at best.
OnThursday, he also noted that he has moved to reform the way governmentfunds are awarded, including ending the practice of "unnecessary"no-bid contracts, for a projected savings of up to $40 billion a year.And he has called for the elimination of subsidies paid to privateinsurers through Medicare, for a savings of $22 billion a year.
Whetheror not lawmakers adopt the president's recommended cuts is anothermatter. They are likely, however, to come up with their own cost-savingproposals. House Speaker Nancy Pelosi, D-Calif., for instance, hasgiven her House committee chairmen until June 2 to provide a list ofways they can reduce expenses.
Fiscal discipline is among the pillars of the new economic foundation Obama has said he wants to build.
Yetit's unlikely the $17 billion will be used to run down the deficit. Afew weeks ago, in previewing the cuts to come, the president said themoney saved would be put toward his proposed initiatives in healthcare, education and energy. Indeed, the $2,500 tuition tax credit andthe larger Pell Grant are among his proposals and temporary provisionsfor them already exist in the $787 billion stimulus package enacted inFebruary.
The House and Senate have agreed to amore than $3.5 trillionbudget outline for fiscal 2010, which begins Oct. 1. That's roughly thesize of the president's budget request. The proposals Congress and thepresident are making, however, would push the long-term deficitsignificantly higher over a 10-year period, even though they wouldreduce it over the first 5 years.
While few suggest thegovernment retract its spending largesse while the economy is stillstruggling, deficit hawks caution that lawmakers must do more than paylip service to the long-term debts situation.
Thanks to the financial crisis, tax receipts are down sharplythis year while spending demands have grown to record levels. Forecastsof a slow recovery and estimates of a large price tag for Obama'sproposed health care, energy and education initiatives have worsenedsomewhat the already tough fiscal outlook.
The GovernmentAccountability Office estimates that all federal revenue will be eatenup by government costs for Medicare, Medicaid, Social Security andpublic debt interest by 2025. Last year, the estimate was 2030, saidCharles Konigsberg, an expert on the federal budget at deficit watchdoggroup the Concord Coalition.
Orszagreiterated the administration's position that the biggestdeficit-cutting efforts will come from curbing the growth in healthcare costs.
Former Congressional Budget Director Rudolph Penner,an institute fellow at the Urban Institute, agrees. And that's why hecharacterizes the $17 billion in proposed cuts as also largely symbolicin nature.
"It looks trivial in that it won't have a big impacton the long-term fiscal problem. ... [But] there's some symbolic meritto what he's doing," Penner said.
On top of that, the UnitedStates is borrowing near record amounts to fund the cost of revivingthe economy and financial system.
But ultimately buyers of U.S.debt will want to see harder evidence that the administration isserious about dealing with the country's deficits by reforming Medicareand Social Security and demonstrating a willingness to raise taxes tokeep the deficit under control, Penner said.
Cuts shouldn't be made all at once, but phased in giving future retirees time to plan for the adjustments, Penner said.
Soundinga similar note was David Walker, who runs the Peterson Foundation,which seeks to raise awareness of the country's long-term fiscalsituation.
"To put things in perspective, $17 billion isequivalent to a little over 3 days of federal deficits at currentrates. The federal government needs to engage in more comprehensiveefforts on both the spending and tax preference sides of the ledger,"Walker said in a statement.
The White House budget office'scost-saving proposals are part of a two-stage release on the finaldetails of Obama's budget request. Next week, the OMB will release moreanalysis on the country's fiscal policies, along with "minor updatesand changes" to the administration's summary tables of budgetforecasts, first put out in February.
- CNN's Suzanne Malveaux contributed to this report. 
