Obama budget could include spending cuts

President Barack Obama walks across the tarmac to board Air Force One at Andrews Air Force Base near Washington, January 12 , 2010.

WASHINGTON (Reuters) - Spending cuts could be on the horizon for many U.S. government programs as President Barack Obama seeks to get the record U.S. debt under control without undermining efforts to boost the economy.

With the White House seeking to show it is serious about reducing unprecedented deficits, congressional staffers and outside experts say they anticipate Obama's budget proposal due in early February could include cuts of up to 5 percent for some domestic spending programs.

Spending cuts could reassure financial markets that the government is serious about bringing down record budget deficits, and undercut Republican arguments that spending has grown out of control under the Obama administration.

Concerns about the deficit have been a factor in Obama's declining poll numbers.

But the proposed cuts could also be a tough sell for Obama's fellow Democrats on Capitol Hill, who are pressing for additional government spending to bring down the 10 percent unemployment rate ahead of congressional elections in November.

Lawmakers expect the bill will have little fat.

Following a meeting Tuesday evening of House Democratic leaders, House Budget Committee Chairman John Spratt said: "The administration has told me they are going to have a very strict and tight budget this year and that there will be provisions made in it to reduce the deficits in the out years. What form that's going to take, I do not know."

The White House "has to write a budget that meets two very different goals," said Tom Kahn, chief of staff of the House Budget Committee. "One is keeping the recovery going, the other is making long-term improvements to the deficit."

White House budget officials last year asked domestic government agencies to prepare two budgets: one reflecting current funding levels and one with a decrease of 5 percent.

One budget expert predicted that Obama's final proposal will fall in that range.

"My understanding is somewhere between zero and minus five," said Stan Collender, who has worked for both the House and Senate budget committees.

One congressional staffer shared Collender's assessment, though others cautioned it remained unclear what the White House would do.

Any spending cuts would probably not apply to the Defense Department or entitlement programs like Social Security and Medicare.

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They would be concentrated in the roughly 20 percent of government spending that goes to scientific research, education, transportation infrastructure or other domestic programs that are funded by Congress each year.

Many of those programs saw substantial increases last year as Democrats sought to boost the struggling economy and make up for what they said were years of under-investment during the Republican administration of George W. Bush.

The $787 billion stimulus bill passed in February last year also provided hundreds of billions in extra domestic spending.

For example, the Environmental Protection Agency saw its regular budget increase 36 percent to $10.3 billion in the fiscal year that started October 1, 2010. On top of that, the agency also had another $7.8 billion in stimulus money to hand out for projects like sewer-system upgrades.

Currently, both the White House and Congress are focused on boosting the economy. But private economists expect the recovery to be well under way by the time the new budget year begins in October.

Obama could argue that the economy would be healthy enough by then to withstand spending cuts.

Spending cuts could also counter Republican arguments that government spending under Democrats has gotten out of control, said Joe Minarik, who served in Democratic President Bill Clinton's budget office.

"They are taking hits as big spenders, and this is one way to fight back. They will need to do much more as well, but every dollar they get out of appropriations is a dollar they don't have to get elsewhere," Minarik said in an e-mail.

(Additional reporting by Caren Bohan; Editing by Cynthia Osterman)