Obama Banking on Budget Deficit Reduction

When President Barack Obama announced his proposed 2011 budget on Feb. 1, he included a key word in the title. Obama referred to a focus on "responsibility." It was a clear indication that he's making the country's mounting debt a top priority. In fact, the White House Web site introduces the budget with these words from Obama: "Let's invest in our people without leaving them a mountain of debt."

Obama admits in his comments on the proposed budget that the government, under his guidance, accepted an increase in the federal deficit in order to "rescue the economy." Now, though, he says Congress needs to take greater responsibility for its spending. His $3.8 trillion budget proposes to cut the deficit by improving efficiency in some programs and eliminating others. If successful, Obama's fiscal conservancy might make him much more like fiscally moderate Democrat Bill Clinton than like the spendthrift Democrat that many labeled him as over the past two years.

Certainly, all of Congress supports cutting into the federal deficit. It has been the cornerstone of Republican rhetoric for a number of years, and it was President Bill Clinton who actually succeeded in cutting into the ballooning deficit by sending to Congress some budgets that left surpluses.

Now, though, there's a fight to be waged. Anytime someone starts taking things away from people, those people become defensive. In 2009, Obama proposed a 2010 budget that called for deep cuts in spending on some Department of Defense weapons systems. That angered many Republicans, who saw it as a sign that Obama was going to weaken the nation's defense at a time when it is fighting multiple wars.

Now, the anger is as likely to rumble from Obama's own side of the aisle. No longer is Obama simply taking the hatchet to defense programs. Obama's new budget proposes cutting or reducing 120 federal programs to achieve $23 billion in savings in 2011, and he's calling for a freeze on all non-security discretionary funding. For three years, the federal government will not have the option of increasing what it spends in a number of areas. Therefore, any rise in costs must be offset by cost-cutting measures led by the bureaucrats who run various welfare programs and other federal entities.

It's no secret that discretionary spending has been the thorn that reopened the federal deficit. When Clinton took office in 1991, the United States had $533 billion in discretionary spending and a $5.6 trillion national debt. By Sept. 2007, discretionary spending was up to $1 trillion and the national debt had grown to $9 trillion.

The Bush-era budget climbed even as Americans began to feel the effects of Clinton's TANF legislation. The Temporary Assistance for Needy Families program limits to five the number of years that families can receive federal welfare assistance. Today, fewer Americans receive federal welfare assistance than a decade ago. Meanwhile, more Americans are living in poverty.

For this reason, Obama's cuts might not sit well with Democrats, who historically favor increased welfare spending as a means of tackling various societal problems. For some Democrats, Obama's freeze on spending means little chance to help many of those who have been pushed out of the welfare system, and he's not only freezing welfare programs. Obama's budget also calls for some programs to be cut. For example, he has called for reductions in some Housing and Urban Development programs that provide needy families with affordable housing and has called for the elimination of the Advanced Earned Income Tax Credit.

When programs are cut, there are consequences. Obama appears to believe that the benefits are worth the sacrifices. The benefits, though, are a gamble in themselves. Obama hopes that cutting spending can help keep the U.S. dollar competitive and help the U.S. economy regain some strength. Other factors, though, could limit the success of the economy. If unemployment continues at levels above 10 percent for much longer, a number of families will require the welfare assistance, and that could make it difficult to cap spending on some of the most costly welfare programs.

http://www.federalbudget.com/

http://www.cbo.gov/budget/data/historical.pdf

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm