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Obama to Send Congress Multitrillion-Dollar Budget Likely to Show Cutbacks

President Barack Obama will send a multitrillion budget to Congress on Feb. 14, administration spokesman Kenneth Baer said, setting up a conflict over spending that may dominate a divided Congress for the rest of the year.

The budget for fiscal 2012 is a political document that will put into precise language the administration’s priorities for increasing economic growth and creating jobs. Republicans who campaigned on promises to slash spending took control of the U.S. House of Representatives and reduced the Democrats’ majority in the Senate.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said Obama and legislators from both political parties need to work together to reduce U.S. debt.

“We have two opportunities, both the continuing resolution and the debt ceiling, to try to accomplish something on a bipartisan basis on both our short-term debt and our long-term unfunded liability,” McConnell said in a television interview yesterday on NBC’s “Meet the Press” program. “The president ought to step up to the plate with us and tackle it together.”

The U.S. Congress approved a continuing resolution Dec. 21 that would keep the government funded through March 4. Democrats wanted funding to last through the government’s fiscal year, which ends Sept. 30.

Photographer: Brendan Hoffman/Bloomberg

U.S. President Barack Obama. Close

U.S. President Barack Obama.

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Photographer: Brendan Hoffman/Bloomberg

U.S. President Barack Obama.

Obama’s Cuts

Obama says he’s ready to trim or eliminate programs, specifically mentioning community action grants to local governments, to allow spending increases for his priorities.

“We want to cut with a scalpel as opposed to a chain saw,” Obama said in an interview broadcast online by Google Inc.’s YouTube on Jan. 27. “Frankly, we’re just going to have to trim some of these programs.”

In his Jan. 25 State of the Union address, President Obama proposed a five-year freeze on domestic spending for a savings of about $400 billion over a decade. Republicans, and some Democrats, say the freeze doesn’t go far enough, and they’re demanding big spending cuts as part of any deal to raise the

The nonpartisan Congressional Budget Office said Jan. 26 that U.S. budget deficit will widen this year to a record $1.5 trillion, partly because of the $858 billion tax-cut measure passed last month by Congress.

‘Daunting’ Challenges

“The U.S. faces daunting economic and budgetary challenges,” the report said.

Obama’s freeze wouldn’t apply to defense, Medicare, Medicaid, Social Security and interest in the national debt. As a result, the freeze would apply to 18 percent of the budget, or $663 billion, in the current 2011 fiscal year, the CBO said in an economic outlook published Jan. 26.

Republicans, and some Democrats, say the freeze doesn’t go far enough and are demanding big spending cuts as part of any deal to raise the nation’s $14.3 trillion debt ceiling, which may be reached as early as March.

McConnell said on NBC that Social Security is “in trouble” and Medicare is on an “unsustainable path.”

“The American people are asking us to tackle these problems,” McConnell said. “The president needs to be more bold. We are prepared to be.”

Opening Offer

It’s “an opening offer in a very tough negotiation” to reduce the deficit, Alice Rivlin, former Federal Reserve vice chairman, said on the same program.

The budget will also provide the administration’s latest forecasts for economic growth, inflation and unemployment rate this year and next.

Obama will also provide details of proposals he highlighted in the State of the Union message, including the repair of roads, bridges and mass-transit systems and creation of an infrastructure bank to help pay for them.

He would add 100,000 teachers of science, engineering and mathematics within 10 years; make permanent a $10,000 tuition tax credit; replace education’s No Child Left Behind Law; increase research and development spending; provide high-speed wireless access to 98 percent of Americans in five years; abolish tax breaks for oil, gas and coal producers; and put 1 million advanced-technology vehicles on roads by 2015.

William Daley, the new White House chief of staff, said that Obama will lay out a “very substantial cut” to the budget and that the administration is “not open to refighting” the health-care law. Daley spoke in an interview on CBS television’s “Face the Nation” program.

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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