Obama Eyes Budget Freezes to Fight Deficit

White House Directs Agencies To Plan for Spending Halts and Possible Cuts Ahead of Midterm Elections

(AP)  The Obama administration has alerted domestic agencies to plan for a freeze or even a 5 percent cut in their budgets, part of an election-year push to rein in record deficits that threaten the economy and Democrats' political prospects next fall.

The deficit-cutting drive comes as President Barack Obama traveled to Asia where several nations, especially China, have expressed concerns about the size of U.S. deficits. China is the largest foreign holder of U.S. Treasury securities and policymakers worry that alarm over deficits could push foreigners into cutting back on their purchases of Treasury debt.

White House budget director Peter Orszag said Friday that it is imperative to start curbing the flow of red ink in coming years so as not to erode the fledgling economic recovery and raise interest rates. But he called it a balancing act and said acting too fast could undercut the recovery.

Orszag wouldn't comment on the specifics of the upcoming budget, which will be unveiled in February, right after Mr. Obama's State on the Union address in which the initiative is sure to be a major focus.

Democratic officials in the White House and on Capitol Hill say options for locking in budget savings include caps on the amount of money Congress gets to distribute each year for agency operating budgets. The officials spoke on condition of anonymity to frankly discuss internal deliberations.

"As part of that fiscal 2011 budget, we will be putting forward proposals that will put us back on a fiscally sustainable path and that have lower deficits," Orszag said in a recent Associated Press interview. "I'm not going to get into the mix between spending and revenues. Obviously deficit reduction requires some combination of those two."

On Thursday, the government reported that the federal deficit hit a record for October as the new budget year began. The Treasury Department said the deficit for October totaled $176.4 billion, even higher than the $150 billion imbalance that economists expected. The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms of $1.42 trillion. That was $958 billion above the 2008 deficit, the previous record holder.

The budget freeze was planned before Democratic setbacks in last week's elections. But the bad results for Democrats - independent voters that were central to Obama's winning coalition last year voted roughly 3 to 1 for GOP gubernatorial candidates in Virginia and New Jersey - appear to have added urgency to the deficit-cutting drive.

Independents, pollsters say, tend to be more concerned about the deficit than other voters and getting them back in the Democratic column is crucial to the party' chances in midterm congressional elections.

The mandate to domestic agencies to limit their budget requests for the 2011 budget year comes as an economic advisory board chaired by Paul Volcker is debating ways to reform the tax code. Virtually all budget experts say there will have to be revenue increases to make any significant dent in the deficit.

The White House edict to agencies to submit spending plans at least freezing their budgets is but one round in internal administration deliberations on the budget. Cabinet heads are sure to seek exemptions, and Orszag warned that firm budget decisions haven't been made.

Given Democrat's poor poll number on the deficit, cutting it may be a case in which the adage that good policy is good politics holds true.

Still, politicians have typically avoided politically painful deficit-cutting steps in election years and recent history has not been kind to politician who have tackled the issue.

Tax-raising deficit deals in 1990 and 1993 had big political consequences for President George H.W. Bush, who lost his re-election bid, and for President Bill Clinton, whose party lost control of Congress the following year.

[jgg000015]

ok. let's see the cuts

[erichsh]

Well, I guess that does it for a $trillion healthcare program - or a $trillion cap-and-trade program, eh? NOT.

[OldGeezer43]

If you want to reduce the deficit stop spending. Introducing programs with shadow financing that increases the deficit. The only do that by raising taxes. Pres Obama are you willing to bite the bullet and tell the American public that either you have to raise taxes or cut government (not a bad idea).

[retm-w]

Just cut foreign completely, we can't afford to support other countries anymore.

[retm-w]

correction should be cut foreign aid.

[gboyd41]

voxpopulus-indeed you did, and what a bad choice you made!

[erich_1-2009]

The Treasury Department said the deficit for October totaled $176.4 billion, even higher than the $150 billion imbalance that economists expected. The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms of $1.42 trillion. That was $958 billion above the 2008 deficit, the previous record holder.

$1.42 Trillion, $958 Billion above the 2008 deficit!

Incredible, and now they plan to pass this Pelosicare mess?
What a nightmare! This could make us go bankrupt!

[snoheather]

You obviously don't remember that the bank bailouts happened in the 2009 budget, which started on October 1st, 2008. It is amazing how people seem to forget that the budget deficit for 2009 started when Bush was still in office and bailing out the banks. When will you people stop trying to blame all the problems this country faces on the democrats or the repubicans? All politicians from both the main parties have caused the mess this country is in. I am so tired of this back and forth blame game. Everyone needs to pull their heads out of their behinds and come together or else this country will fall.

[rharrin1]

Obama should have rescinded the bush tax cuts the day after being sworn in.

You can't pay bills without money.

[ramos1129]

No budget freezes necessary if we do this:

1. End the Iraq and Afgan war.
2. Give the President the Line Item Veto.
3. Tax the underground cash society.
4. Small things like NASA selling/leasing its assets to
the private space industry.
5. Listen to the federal employees. They know where the waste is.

There are more such measures that can be taken.

[stn_sage]

OH, GREAT! An election year is coming up...Obama and the Democrats have been spending monies like 'there's no tomorrow'...much of the public is 'ticked off' about it...SO, NOW they are going to develop a 'spending ethic'...how bloody nice of them!

I wish they would have been thinking about deficits when they were giving away TRILLIONS of dollars to Wall Street and the Fed...who...as it turns out...NOW, claim they really didn't need the monies after all!

While a few organizations have returned some monies...considering they say they don't NEED it...there's been NO rush to turn the vast bulk of it back in! WHY?! GREED.

This just goes to stress the fact that politicians are like spoiled, selfish, greedy over-indulged children...in that, they will only do,
what they are FORCED to do!

For a better functioning government, vote for replacements for incumbents!

[voxpopulus]

We did. Thanks.

[crikeytx46]

" it is imperative to start curbing the flow of red ink in coming years " - Orszag

Somebody woke up !!!!!