President Barack Obama on Thursday unveiled his first budget, vowing to enact broad cuts in spending while continuing to hold onto “investment” priorities he touted during the campaign.
“No part of my budget will be free from scrutiny or untouched by reform,” Obama said during remarks at the White House. “We will each and every one of us have to compromise on certain things we care about.”
But Obama said he would cut “what we don’t need, to pay for what we do,” adding, “What I won’t do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century.”
Obama said such spending on energy, education and health care initiatives has been too long neglected. “These investments must be America’s priorities,” he said.
The budget assumes a massive $1.75 trillion deficit this year, and the fastest accumulation of debt in the nation’s history.
Although annual deficits would drop to $533 billion in 2013, they would then begin to rise through the rest of the decade, and the federal debt would hit $17 trillion in fiscal 2013, up from $10 trillion at the end of fiscal 2008. The debt would hit $23 trillion by the end of the decade – about $75,000 for every American alive today.
That’s despite a ramping down of the war in Iraq, tax hikes on the wealthy in 2011 and the elimination of corporate tax shelters.
The budget proposes a long-term fix for the alternative minimum tax at a cost of $576 billion over a decade, the permanent continuation of $400 per worker tax breaks provided by the stimulus package at a cost of $537 billion and provide more than $234 billion in additional tax breaks to people.
The budget would also continue much of the Bush-era tax cuts at a cost of $2.7 trillion, although top earners would see their tax rates return to levels similar to those under President Bill Clinton. The budget also would eliminate some proposed cuts to doctors under Medicare, which like the AMT has become an annual headache for Congress.
A placeholder of $250 billion for additional support for the financial system is included, although the administration has yet to formally ask for additional money.
And the budget also includes placeholders for the two largest items on the Obama agenda – enacting sweeping health care reform and enacting a cap-and-trade system that would generate funding for green energy initiatives. Most of the funding from the carbon auctions would be returned to low- and middle-income Americans to offset higher costs that the system would impose.
The cost of Obama’s health care initiative is offset in part by cost savings in Medicare, including the elimination of subsidies for private health plans known as Medicare Advantage with a 10-year savings of $176 billion.
Costs for the wars in Iraq and Afghanistan would shrink from $140 billion this year to $130 billion next year and $50 billion in future years, but the administration cautioned that the number is merely a “placeholder.”
Obama’s budget also assumes slowing the growth of defense spending from its dramatic rise since the Sept. 11, 2001, attacks, holding increases below inflation. Many other departments would also see relatively flat funding, not counting the massive spending in the stimulus package for many agencies.
The 134-page document will be supplemented by the more traditional budget in April.