WASHINGTON Feb 1 President Barack Obama on
Monday will propose a three-year freeze on many domestic
government programs to help tame U.S. budget deficits that
hover at levels not seen since World War Two.
The expected 10-year savings of $250 billion, which will be
outlined in Obama's proposed budget for the 2011 fiscal year
that begins Oct. 1, would not come close to closing budget
deficits that are expected to remain stubbornly high as an
aging population drives up spending on retirement and
Budget experts say Congress must either raise taxes, cut
spending or do both to bring the budget back into line but
doing so could prove politically difficult.
Obama and many of his fellow Democrats hope two new
measures will make it easier for them to reach that goal: a
bipartisan commission and "paygo" rules to prevent new deficit
WHAT IS THE PROBLEM?
U.S. debt has more than doubled over the past decade to
nearly $12.4 trillion, thanks to a combination of tax cuts,
wars in Iraq and Afghanistan, elevated domestic security
spending and the deepest recession since the Great Depression
of the 1930s.
The government posted a record $1.4 trillion deficit for
the fiscal year ended Sept. 30, 2009, and the nonpartisan
Congressional Budget Office projects a deficit of $1.35
trillion for the current fiscal year.
This could spur investors including China, the biggest U.S.
foreign creditor, to demand higher rates for Treasury bonds.
That would push the government's borrowing costs dramatically
higher and crowd out spending in other areas.
WOULD A COMMISSION HELP?
Possibly. Commissions are a time-honored Washington method
of outsourcing difficult decisions, enabling Congress to close
outdated military bases and shore up Social Security in the
But far more commissions end in obscurity, their findings
ignored by lawmakers.
Democratic Senator Kent Conrad and Republican Senator Judd
Gregg proposed a bipartisan commission to come up with a way to
close the budget gap, but it failed in the Senate last week
after interest groups on the left and the right mobilized
Obama plans to set up a similar task force by executive
order. It would consist of 18 members: six Republican
lawmakers, six Democratic lawmakers, and the remaining six
appointed by the administration.
Democratic congressional leaders have pledged that they
would ensure that its findings would get a vote, probably after
the November congressional elections when lawmakers are
presumably feeling less political pressure.
But many Republicans have said they would not participate,
viewing it as a vehicle for Democrats to impose tax increases.
IS 'PAYGO' AN ISLAND IN THE SOUTH PACIFIC?
No. It's political shorthand for a set of budget rules that
would require any new tax cuts or spending programs to be
offset by spending cuts or tax hikes elsewhere. Democrats say
similar rules helped the government turn deficits into
surpluses in the 1990s.
Both chambers operate under paygo rules currently, but they
have frequently been set aside, allowing more than $1 trillion
in deficit spending over the past two years, according to
The Senate voted along party lines last week to give paygo
rules the force of law, which would make it tougher to set them
aside. The House of Representatives has passed a paygo law
twice already and is expected to sign off on the Senate's
version this coming week.
Bowing to political reality, the bill contains loopholes
for expiring tax cuts that Congress is expected to renew, such
as the estate tax and the alternative minimum tax, but the
exemptions would end after two years.
An exemption for elevated Medicare spending would be phased
out five years.