A Sneak Peek at Obama’s Tardy Budget
Infrastructure spending, Energy Security Trust spending, research and development spending -- and entitlement reform?
April 8, 2013 - 12:44 am
WASHINGTON – President Obama’s extraordinarily tardy budget proposal for Fiscal Year 2014 is expected to include new funding for infrastructure improvement and scientific research but won’t offer a path toward reconciling spending with revenues any time in the near future.
The package, due Feb. 4 and slated for release on April 10, might also provide significant changes in entitlement programs like Social Security, perhaps altering the manner in which cost of living increases are calculated, resulting in smaller checks to beneficiaries.
“The president’s budget will achieve what it has in the past, which is through sensible, balanced deficit reduction, bring our deficit and debt into a place where we are on a fiscally sustainable path, where the ratio of debt to GDP is below 3 percent, and to do that in a way that also allows us to invest in our economy so that we’re building infrastructure for the future and we’re increasing our energy independence, and making sure that our kids are being educated so we can compete 25 years from now and not just today,” said White House Press Secretary Jay Carney.
Unlike the spending plan proposed by Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, the Obama package will not produce a balanced budget over a 10-year window. It will, Carney said, “achieve a compromise that allows for both entitlement reform and tax reform that produce the savings necessary” to reduce the deficit during that period by more than $4 trillion.
The president’s top priority, Carney said, is “economic growth and job creation, not deficit reduction solely for the purpose of reducing the deficit.”
That effort, he said, will “put our economy on a fiscally sustainable path.”
Under federal law, the president is expected to produce an executive branch budget by the first Monday in February. Obama has failed to meet the target every year save for 2009, his first year in office.
This year is no exception, save for the fact that it is even later than usual – about nine weeks overdue. The administration attributes the delay to extended negotiation with Congress over sequestration – across-the-board cuts required by a prior budget agreement – and the appointment of a new director of the Office of Management and Budget, that being Jack Lew.
Congressional Republicans have blasted the administration’s tardiness and expressed disappointment that the president’s proposal will fail to balance the budget.
“It almost seems the president believes all spending is stimulating the economy and no spending, even wasteful spending, should be cut,” said Sen. Jeff Sessions, (R-Ala.), ranking member of the Senate Budget Committee.
The administration has hinted at some new initiatives in the upcoming budget plan, a large portion dealing with the nation’s crumbling infrastructure. The American Society of Civil Engineers, which recently awarded America’s infrastructure a rating of D+, placed total investment needs at $3.6 trillion by 2020 — leaving a funding shortfall of $1.6 trillion based on current funding levels.
“We must commit today to investing in modern, efficient infrastructure systems to position the U.S. for economic prosperity,” said Gregory E. DiLoreto, the organization’s president. “Infrastructure can either be the engine for long-term economic growth and employment, or it can jeopardize our nation’s standing if poor roads, deficient bridges and failing waterways continue to hurt our economy.”
In response, Obama is expected to propose a program called the Partnership to Rebuild America, with an estimated price tag of $21 billion. The initiative has three parts:
- The creation of a fund, better known as an infrastructure bank, to attract private and public investment for projects selected based on their benefit to the overall economy.
- The formation of a new bond program – America Fast Forward – intended to provide local and state governments with more flexibility and power to attract private investment for public projects.
- Strengthening a loan program for transportation projects that, in the past, has helped governors and mayors leverage four times the money Washington put into it.
Speaking at a recent rally in Miami, Obama told the crowd that “there are few more important things we can do to create jobs right now and strengthen our economy over the long haul than rebuilding the infrastructure that powers our businesses.”
“That’s how we’ll create good jobs doing the work America needs done,” Obama said. “That’s how we’ll encourage more businesses to start here, and grow here and hire workers here.”
On the research side, Obama on Tuesday told an audience in the East Room of the White House that he intend to seek $100 million for the BRAIN initiative intended to provide scientists with “the tools they need to get a dynamic picture of the brain in action and better understand how we think and how we learn and how we remember. And that knowledge could be — will be — transformative.”
Obama said funds will be directed toward the National Institutes of Health, Defense Advanced Research Projects Agency, and the National Science Foundation to get this project off the ground.
Despite ongoing efforts, scientists have been unable to cure diseases like Alzheimer’s, autism, or the effects of a stroke. The funds will be used to address various health issues.
“As humans, we can identify galaxies light years away, we can study particles smaller than an atom,” Obama said. “But we still haven’t unlocked the mystery of the three pounds of matter that sits between our ears. But today, scientists possess the capability to study individual neurons and figure out the main functions of certain areas of the brain.”
On the energy side, Obama plans to call for the creation of an Energy Security Trust, at a cost of $2 billion over 10 years, to provide a funding stream for research focused on developing cost-effective transportation alternatives like vehicles that run on electricity, homegrown biofuels, fuel cells, and domestically produced natural gas.
Funding, according to the administration, will come from royalty revenues generated by oil and gas development in federal waters of the Outer Continental Shelf.
As part of what is being called the “Blueprint for a Clean and Secure Energy Future” the president also intends to make the renewable energy Production Tax Credit permanent to provide an incentive for investments in new clean energy. He also is looking to invest more than $40 million in research to ensure safe and responsible natural gas production. And as part of a $375 million investment in cleaner energy from fossil fuels, the president’s budget includes significant funding for clean coal technology and a new $25 million prize for the first natural gas combined-cycle power plant to integrate carbon capture and storage.
And there are indications that Obama is prepared to offer changes in Medicare and Social Security despite anticipated opposition from his fellow Democrats. The proposals are said to be similar to those offered to House Speaker John Boehner, (R-Ohio), during negotiation over the “fiscal cliff” last year that led to sequestration.
The changes might include:
- Adopting what is called the “chained CPI” – a way to calculate the consumer price index that differs from the one currently in use. Such a switch would result in reductions in federal benefit programs – most particularly Social Security.
- Combining Medicare Part A – which covers hospital stays – with Medicare Part B – which covers doctors’ visits, creating a single deductible. The move is expected to increase out-of-pocket costs for those who enter the program in the future.
- Additional reforms ranging from a reduction in subsidies to prescription drug companies to more cost sharing.
As usual, don’t be surprised when congressional Republicans declare the budget “dead on arrival” once if finally gets there.
“I will stipulate now that the president’s budget will not be passed word for word into law,” Carney said. “It has never happened, and it won’t happen this time. But the president’s budget will make clear what his priorities are and many of those priorities will reflect the kinds of things that have enjoyed bipartisan support in the past and we believe enjoy bipartisan support now.”