Obama Economic Plan Seeks Budget Freeze

President Barack Obama announces economic initiatives for struggling middle class families, Monday, Jan. 25, 2010, in the Eisenhower Executive Office Building across from the White House in Washington. (AP Photo/Charles Dharapak) AP

President Barack Obama is expected to ask for a three-year freeze on part of the federal budget when he gives his State of the Union address Wednesday night.

The freeze would affect about $477 billion in money available for domestic agencies whose budgets are approved by Congress each year. It's a relatively small portion of the federal budget and is considered discretionary spending.

The Pentagon, veterans programs, foreign aid and Homeland Security would be exempt from the freeze, which would have only a modest impact on a deficit expected to match last year's $1.4 trillion.

Steps needed to really tackle the deficit include tax increases and curbs on benefit programs like Medicare, Medicaid and Social Security. That's why Mr. Obama is backing a plan to create a task force to address the problem. But Senate sponsors of the plan say it's attracted too much opposition from the right and left to prevail.

Fresh numbers on the deficit are due from the Congressional Budget Office later Tuesday. They're expected to bring more bad news as the president faces mounting voter anger.

On Monday, Mr. Obama unveiled plans to help a middle class "under assault" pay its bills, save for retirement and care for kids and aging parents.

The three-year spending freeze plan will be part of the budget Mr. Obama will submit Feb. 1, senior administration officials said, commenting on condition of anonymity to reveal private details.

Calling it "good politics" for Mr. Obama to say he wants to cut the deficit, CBS News chief Washington correspondent Bob Schieffer said the president will likely face a Congress uneasy about cutting pet programs.

"Whether he can get it passed in an election year…Schieffer said.

A senior congressional aide says the latest estimates put this year's federal budget deficit at $1.35 trillion Tuesday.

CBS News chief political consultant Marc Ambinder said that the effect of a freeze on the budget, deficit and debt will probably be negligible.

As The New York Times reported Tuesday:

"The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time."

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Mr. Obama's separate public comments previewed the State of the Union address he will deliver Wednesday night.

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The measures are not intended to create jobs - but to ease the pain, reports CBS News senior White House correspondent Bill Plante reports.

"The president is waiting for the economy to turn around and in the interim the best that can happen for him is that people see he is on the case, that he's working for them," said CBS News' John Dickerson.

The initiatives amount to a package of tax credits, spending expansions and new mandates on employers to encourage retirement savings by workers.

Mr. Obama's State of the Union address will outline his second-year agenda across a spectrum of issues, including tighter rules on Wall Street behavior and a push for financial discipline in Washington. He also is expected to touch on the controversial issue of gays in the military.

Among the president's economic ideas:

- Nearly doubling the tax credit that families making under $85,000 can receive for child care costs, with some help for families earning up to $115,000, too.

- Capping the size of periodic federal college loan repayments at 10 percent of borrowers' discretionary income to make payments more affordable.

- Increasing by $1.6 billion the money pumped into a federal fund to help working parents pay for child care, covering an estimated 235,000 additional children.

- Requiring employers who don't offer 401(k) retirement plans to offer direct-deposit IRAs for their employees, with exemptions for the smallest firms.

- Spending more than $100 million to help people care for their elderly parents and get support for themselves as well.

In The New York Times Op-Ed section Tuesday, Sen. Orrin Hatch, R-Utah, and Sen. Charles Schumer, D-N.Y., proposed a new version of a job tax credit. The senators write:

"Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2 percent Social Security payroll tax on that employee for the duration of 2010. The Social Security trust fund will then be made whole with spending cuts elsewhere in the budget between now and 2015. That's it."

The White House maintained that its imperative still is to create jobs. Unemployment remains in double digits, and the economy is the public's top concern. Yet Mr. Obama said that squeezed families need help in other ways, too: paying for child care, helping out aging parents, saving for retirement, paying off college debt.

What matters ultimately to people, Mr. Obama said, is "whether they see some progress in their own lives. So we're going to keep fighting to rebuild our economy so that hard work is once again rewarded, wages and incomes are once again rising, the middle class is once again growing."

Less clear was how much the programs would cost or where the money would come from.

Officials deferred comment until the release of the budget.

Mr. Obama, whose poll numbers are off, is trying to sharpen his economic message in a way that shows people he is on their side. White House officials say they know people have been turned off by the long, messy fight for health insurance reform. Plus, there's a perception that families have gotten far less help than big banks.

The economy is growing, but not fast enough to bring down widespread joblessness. The unemployment rate is at 10 percent and most economists say it could take until at least 2015 for it to return to more normal levels.

The plans Mr. Obama set forth came from the yearlong work of a task force, led by Vice President Joe Biden, that was charged with helping the middle class.

"We're talking about dignity. We're talking about security," Biden said. "We're talking about knowing your pension is safe, your health insurance is reliable, your elderly parents and your children are going to be cared for, your neighborhood is safe."
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