By Suzanne Kubota, Meg Beasley,
and The Associated Press

President Barack Obama sent Congress a $3.73 trillion budget Monday that holds out the prospect of eventually bringing deficits under control through spending cuts and tax increases.

In the President’s proposed FY 2012 budget to Congress, Barack Obama asks federal employees to lead the way taking cuts in government spending. “Starting in 2011, the President has proposed and the Congress enacted a two-year pay freeze for all civilian Federal workers,” including those working in the Department of Defense, according to the Budget Message from the President.

“This freeze does not reflect on the performance of Federal workers; rather, it reflects the shared sacrifices we must make.”

The budget proposal goes on to say: “The men and women who serve their fellow Americans as civilian Federal workers are patriots who work for the Nation often at great personal sacrifice; they deserve our respect and gratitude. But just as families and businesses across the country are tightening their belts, so too must the Federal Government.”

“Priorities will have to be set,” said OMB Director Jacob Lew during a press conference. “Orienting our priorities around doing the things that are most important is going to be critical. I don’t think it’s going to be easy. We have a great workforce and there are additional burdens being put on the federal workforce. We’ve tried to provide growth where those burdens can’t be managed within totals, but we also have to look internally to get administrative savings in most places.”

Lew said changes to how agencies operate will play a significant role in trimming the deficit as well.

“We are putting more federal funding up for competition, cutting waste and reorganizing government so that it better serves the American people,” said Lew. “The budget cuts more than $2 billion in administrative overhead – things like travel, printing supplies and advisory contract services. It embraces the competitive grant programs based on the ‘race to the top’ model and applies that to programs from education to transportation to workforce training programs to the way we encourage commercial building efficiency and electrical vehicle deployment.”

However, the President is proposing a pay raise for members of the military. “The Budget also includes funding for a 1.6 per­cent pay raise for military service members, as well as a variety of monthly special skill-based payments, enlistment and reenlistment bonuses, and other benefits.”

The budget also proposes a 5-year freeze is proposed for “all discretionary spending outside of security.” Lew said that freeze will save $400 billion over the next ten years. It will also involve significant program cuts and reductions.

“Part of the cuts are in outdated programs, things that are duplicative, or things that we would choose to cut just because it’s the right thing to do,” said Lew in a press conference. “Part of the cuts are going to be things that we wouldn’t do but for the fiscal challenges we face. In total, we have more than 200 terminations and reductions. We get $33 billion in savings just in this year alone.”

John Gage, president of the American Federation of Government Employees responded to the budget in a press release.

“AFGE is pleased that President Obama’s budget does not propose cutting health insurance or retirement programs for federal employees. Any reduction in these benefits would have severe consequences for federal employees, who already have been subjected to a two-year pay freeze. However, we are well aware that some lawmakers are pushing for more draconian cuts. We urge President Obama to hold firm against any cuts that would diminish services to the American public.”

While the primary message to agencies was one of reduction, certain programs will see their workforce grow. The administration estimates 15,000 federal jobs will be created.

But Lew said growth will be limited to areas that relate to new activities, not a governmentwide trend.

“For example, implementing financial regulatory reform requires new personnel at the Treasury Department, the SEC, the Commodities and Futures Trading Commission,” said Lew. “If you look agency by agency you’ll see that it’s not a story of broad based growth.” Lew also said that agencies need to examine how they operate – that business as usual can no longer be business as usual.

The President also proposes modernizing government and cutting costs in the following ways:

• Cut improper payments by $50 billion
• Dispose of excess or under-utilized fed­eral property – The President says the federal government has 14,000 excess buildings and 55,000 under-utilized buildings. He is calling for $8 billion in savings by the end of 2012.
• Reorganize government
• Reduce administrative overhead
• Move to competitive grant programs based on the successful race to the top
• Save billions of dollars in contracting
• Continue efforts to rigorously evaluate program performance
• Continue to drive progress on priority goals – OMB will help agencies work with the Performance Improvement Council to monitor the review processes of 24 agencies with priority goals to identify best practices and conduct quarterly data driven reviews
• Reform how information technology is procured and used

Obama called his new budget one of “tough choices and sacrifices,” but most of those cuts would be held off until after the end of his first term.

Overall, Obama proposed trimming the deficits by $1.1 trillion over a decade although his changes would actually add to the deficits this year and next. Obama is projecting the deficit will hit an all-time high of $1.65 trillion this year and then drop sharply to $1.1 trillion in 2012, with an expected improvement in the economy and as reductions in Social Security withholding and business taxes expire.

Obama’s 2012 budget would actually add $8 billion to the projected deficit for that year because the bulk of the savings he will achieve through a freeze in many domestic programs would be devoted to increased spending in areas Obama considers priorities, such as education, clean energy and high-speed rail.

“We have more work to do to live up to our promise by repairing the damage this brutal recession has inflicted on our people,” Obama said.

Obama’s deficit commission made a host of painful recommendations including raising the Social Security retirement age and curbing benefit increases, eliminating or sharply scaling back popular tax breaks, reforming a financially unsound Medicare program and almost doubling the federal tax on gasoline. Obama included none of these proposals in his new budget. The deficit panel called for savings by making these politically tough choices of $4 trillion over a decade, four-times the savings that Obama is projecting.

Colleen Kelley, president of the National Treasury Employees Union, issued a press release expressing approval that the Administration did not endorse all of the Debt Commission’s Recommendations.

“The federal government has a large role to play in securing our country, providing vital taxpayer services, leading our economic recovery and bringing in necessary revenue,” said Kelley. “The administration’s budget recognizes that this country cannot simply institute widespread cuts and expect to prosper.”

Lew said that the administration left nothing off the table when it came to potential cuts.

“We’re achieving savings in all areas of the budget – domestic discretionary spending, defense spending, mandatories, revenues, and we have what we think is a responsible comprehensive approach that gets us to that bottom line,” said Lew. “Now we’re looking forward to working with Congress to get something enacted that is really in the best interests of the American people.”

The Obama budget plan, which is certain to be changed by Congress, would spend $3.73 trillion in the 2012 budget year, which begins Oct. 1, a reduction of 2.4 percent from what Obama projects will be spent in the current budget year.

RELATED LINKS

• Budget breakdown by agency
• Take the poll: Does the budget release affect the way you do your job?

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Associated Press writers Martin Crutsinger, Andrew Taylor, Darlene Superville and Jim Kuhnhenn contributed to this report.
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For the latest on the President’s proposed budget for FY 2012, see the AP story Lew says tough budget cuts in store for feds and for complete coverage of the budget, see the Budget Stories Resource Page on FederalNewsRadio.com

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