February 13, 2011 / 3:46 PM / 8 years ago

UPDATE 5-Obama budget to cut U.S. deficit by $1.1 trillion

* Republicans say cuts are not enough

* White House says to halve deficit by end of Obama’s term (Adds budget details, quotes)

By Jeff Mason and Thomas Ferraro

WASHINGTON, Feb 13 (Reuters) - President Barack Obama’s 2012 budget plan would slash the U.S. deficit by $1.1 trillion over 10 years, officials said on Sunday, but Republicans were unimpressed and vowed to push for deeper cuts in spending.

White House budget director Jack Lew said the proposal to be unveiled on Monday puts the government on track to halve the federal budget deficit by the end of Obama’s first term in office, which extends through 2012.

“We are reducing programs that are important programs that we care about, and we’re doing what every family does when it sits around its kitchen table: we’re making the choices about what do we need for the future,” Lew said on CNN.

One Democrat familiar with the document said that by 2015 or 2016, under Obama’s proposal, federal budget deficits would fall to about 3 percent of GDP, from the current 9.8 percent.

But Republicans, who control the House of Representatives, said Obama’s proposed cuts would not do enough to rein in the growing deficit and promised their own plan would go further.

“He’s going to present a budget tomorrow that will continue to destroy jobs by spending too much, borrowing too much and taxing too much,” House of Representatives Speaker John Boehner said on NBC’s “Meet the Press.”

Representative Chris Van Hollen, the senior Democrat on the House Budget Committee, warned that many members of Congress “are not going to like the individual” spending cuts contained in the Obama budget.

In a telephone interview with Reuters, Van Hollen said, “These are deep cuts but they’re not the hatchet job we’re seeing in the Republicans’ 2011 reductions” that will be debated on the House floor this week.


For full coverage of 2012 budget, click on [nN11152338]


Among Obama’s proposed budget cuts, according to a Democrat who did not want to be identified, are $1 billion in grants to large airports and $1 billion in savings by cutting federal aid to water treatment plants and other infrastructure.

The source, who is familiar with the administration’s budget proposal, said that higher Medicare payments for the elderly to doctors over two years would be paid for with spending cuts totaling around $60 billion.


Obama’s budget proposal kicks off what is certain to be a contentious debate with Republicans, who made big gains in November’s elections fueled by conservative Tea Party activists who want to cut spending and reduce the size of government.

Republican House Budget Committee chairman Paul Ryan would not say whether Republicans would oppose Obama’s plan until he saw the full text.

“We’ll see the details of this budget tomorrow, but it looks like to me that it is going to be very small on spending discipline and a lot of new spending so-called investments,” Ryan said on “Fox News Sunday.”

The budget deficit is forecast to reach $1.48 trillion this fiscal year, or 9.8 percent of U.S. gross domestic product. This would be down from 10.0 percent of GDP in 2010, but still very high for the United States on a historical basis.

The 2012 fiscal year begins on Oct. 1.

The White House intends to get two-thirds of the $1.1 trillion in savings from spending cuts and one-third from tax revenues, including closing several tax loopholes, according to sources familiar with the budget.

That figure is higher than the $400 billion in savings that Obama promised in his State of the Union address in a five-year spending freeze on non-discretionary domestic spending.

“The challenge we have is to live within our means but also invest in the future,” Lew said.

For some financial analysts, the Obama proposal was a sign Democrats were serious about deficit reduction.

“It’s bullish (for bonds) if it’s anything, but the message is that the Democrats are on the alert after the GOP victory in November to borrow the deficit responsibility agenda. So skepticism aside, we’re impressed,” said David Ader, head of government bond strategy at CRT Capital Group in Connecticut.

A Democratic aide said the budget would reduce Pentagon spending by $78 billion over five years. Defense cuts would include the C-17 aircraft, the alternate engine to the Joint Strike Fighter and the Marine Expeditionary Vehicle that the Pentagon says it does not need.

Democrats and Republicans in Congress have clashed over how far to go with spending cuts to trim the deficit. Obama argues some spending increases are necessary to make the U.S. economy more competitive, while Republicans push for deeper cuts and oppose any tax hikes.

A test of whether the parties can work together will be a deadline in April or May for Congress to approve allowing more federal debt or risk the United States falling into a debt default that could cause economic havoc globally.

The White House wants to keep the debate over a long-term fiscal plan separate from the bill to raise the $14.3 trillion debt ceiling, and separate from legislation to replace a stop-gap government funding measure for this year that expires on March 4.

Boehner refused to rule out the possibility of a government shutdown when that stopgap measure runs out. “Our goal is to reduce spending, it is not to shut down the government,” he said. (Additional reporting by Richard Cowan) (Writing by John Whitesides; editing by Anthony Boadle and Christopher Wilson)

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