The White House kicked off what will inevitably turn into a new round of fierce debates in Washington with the unveiling of the administration’s budget, a proposal that projects 2011’s deficit will reach $1.6 trillion.
The plan estimates that the deficit will be reduced by $1.1 trillion over the next 10 years, reaching a level of less than 3% of GDP by 2018, a percentage economists see as sustainable and a dramatic drop from 2011's estimated 10.9%. About three-quarters of the proposed savings come from cuts in spending while tax hikes and tax-break closures would cover the final 25%, according to The Wall Street Journal.
Among the tax-break reductions is a proposal to lower the value of the mortgage interest rate tax deduction for the highest earning families, those with household incomes of more than $250,000. However, similar deduction eliminations have been proposed in the two previous budgets to no effect.
Oil, gas, and coal companies would also see tax-break eliminations to offset the cost of clean energy initiatives. And programs providing home-heating assistance would see cutbacks, as would community-service block grants.
The plan would cut back the Pentagon’s spending by $78 billion dollars over the next five years, freeze salaries for government employees over the next two years, and freeze non-security discretionary spending for five years. It would also cut Pell Grants, eliminating funds for summer terms and the in-school interest subsidy for graduate students.
The plan does not call for substantial cuts in Social Security, Medicare, and other entitlement programs, although both Democrats and Republicans acknowledge that changes must be made as these costs loom ever larger on the country’s financial horizons. According to The Wall Street Journal, these programs will consume 60% of federal spending next year—a number that will continue to balloon unless changes are enacted. The president’s plan does, however, propose saving dollars through increased use of generic drugs and cutting reimbursements to care providers under Medicare and Medicaid.
In addition to bringing down the nation’s debt, the proposed cuts would free up funds for education, technology, clean energy, and infrastructure improvements. The president’s plan calls for $36 billion for loans for new nuclear energy plant construction, and $2 billion for loan guarantees for other renewable energy initiatives. The proposed budget also creates 100,000 teaching positions in science, technology, engineering, and mathematics.
“While it’s absolutely essential to live within our means, while we are absolutely committed to working with Democrats and Republicans to find further savings and to look at the whole range of budget issues, we can’t sacrifice our future in the process,” Mr. Obama said at a Baltimore middle school, where he discussed his fiscal priorities on Monday. “Even as we cut out things that we can afford to do without, we have a responsibility to invest in those areas that will have the biggest impact in our future—and that’s especially true when it comes to education.”
Claire Easley is senior editor, online, for Builder.
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