Obama Releases Budget Blueprint

Outline of full budget includes spending cuts and tax hikes on the wealthy to pay for expansion of health care

By BusinessWeek staff and wire services

The Obama Administration on Feb. 26 took the wraps off a 2010 budget proposal that envisions the federal deficit for 2009 soaring to a record $1.75 trillion. The budget—expected to total more than $3 trillion—would boost taxes on the wealthy and curtail Medicare payments to insurance companies and hospitals to make way for a $634 billion down payment on universal health care.

President Barack Obama said that "hard choices" were involved in establishing the plan for the 2010 fiscal year, which is an outline of the full budget that the White House will send to Congress in April. It includes cuts to some programs, such as agriculture subsidies and what Obama described as an "ineffective" Education Dept. mentoring program that duplicates programs run by other agencies.

"There are times where you can afford to redecorate your house and there are times where you need to focus on rebuilding its foundation," Obama said. "Today, we have to focus on foundations. Having inherited a trillion-dollar deficit that will take a long time for us to close, we need to focus on what we need to move the economy forward, not on what's nice to have."


One aspect of the budget that is bound to be controversial is a move to raise $634 billion over 10 years for the expansion of health-care coverage. Half of the money will come from an increase in taxes on couples making more than $250,000 per year and individuals making more than $200,000 by reducing the benefit they get on certain tax deductions. The other half would come from curtailing payments to hospitals and insurance companies under Medicare and drug payments under Medicaid.

The idea of raising taxes was slammed by Representative John Boehner (R-Ohio), the House Minority Leader. "Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?" Boehner said.

White House Office of Management and Budget Director Peter Orszag said the budget details are necessarily in flux, as the new Administration had only six weeks to work on the outline, rather than the usual six months. He said the budget included more realistic expectations about the costs of the wars in Afghanistan and Iraq, which had not been included in the budget by the Bush Administration.

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