Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Obama to Propose More than $1 Trillion in U.S. Budget Deficit Reduction

Politics / US Debt Feb 14, 2011 - 09:23 AM GMT

By: Global_Research

Politics

Best Financial Markets Analysis ArticlePatrick Martin writes: The Obama administration will release a federal budget today for the fiscal year beginning October 1 that cuts the total federal deficit by as much as $1.1 trillion over the next decade, two thirds of it through cuts in domestic spending, according to press reports over the weekend.


Among the social programs to be gutted are Pell Grants for working-class college students and the LIHEAP program, which provides heating assistance for low-income families and the elderly. (See “Obama to slash home heating assistance for low-income families and seniors”.)

According to the Associated Press, “An administration official says President Barack Obama is proposing to cut $100 billion over a decade from the Pell Grant program through belt-tightening, but use the savings to keep the maximum college financial aid award at $5,550.”

No details were provided, but apparently the plan is to reduce the number of recipients of Pell Grants in order to avoiding reducing the dollar amount of the individual awards. The result will be tens of thousands fewer students from low-income families receiving a college education.

The New York Times reported, “Two-thirds of the reductions that Mr. Obama will claim are from cuts in domestic spending programs, including many he has supported in the past.”

The total deficit reduction is more than double the $400 billion Obama proposed last month to save by freezing domestic discretionary spending at the 2010 level for the next five years. About $300 billion is to come from tax increases, leaving another $400 billion to come from reductions in spending below the 2010 level.

The Times also reported that the Obama budget will call for ending the Bush tax cuts for families with incomes over $250,000 a year, which were extended for two years in a deal with the congressional Republicans in December.

Despite Obama’s claim at the time that he would oppose any further extension of the tax cuts for the wealthy, the administration budget does not include any increased revenue from closing that huge tax loophole—effectively conceding that hundreds of billions in additional tax handouts to the wealthy will continue. In other words, Obama’s promise of a “fight” over tax cuts for the rich in 2012 is so much hot air.

While Obama declared in his Saturday radio and Internet speech, “This budget asks Washington to live within its means, while at the same time investing in our future,” it is the poorest sections of the working class who will be compelled to sacrifice.

The Obama budget freezes pay for federal government workers, imposes the five-year spending freeze for domestic programs, and slashes community action programs, the Community Development Block Grant, and heating assistance.

The gargantuan Pentagon budget would face only a minor trim—$78 billion over ten years, or barely one percent of the cumulative trillions in military spending envisioned over that period. Even this cutback is based on the shaky assumptions that a complete US military withdrawal from Iraq will take place by December 31, 2011, and that US troop strength in Afghanistan will decline from present levels.

The Obama budget will propose $62 billion cuts in federal health spending over ten years to offset the cost of increasing Medicare reimbursement payments to doctors by the same amount. The only significant tax increase, a limit on the value of itemized deductions for wealthy households, is intended to offset the cost of adjusting the Alternative Minimum Tax to prevent it from hitting taxpayers in the $150,000 to $250,000 bracket—a benefit for the more well-off sections of the middle class, not hard-pressed working-class families.

While the Obama administration presses ahead with an austerity budget for FY 2012, the federal government is operating in the fifth month of FY 2011 without a budget. The Democratic-controlled Congress did not pass a single spending bill last year, ending the year by passing a continuing resolution funding federal departments through March 4.

This means that the incoming Republican-controlled House can take immediate action to slash current levels of spending, using the March 4 deadline as leverage. House Republicans wrangled all last week on various proposals to cut current spending by as much as $100 billion, with fissures opened up between the party leadership and the 87 newly elected members, many of them radical right-wingers aligned with the Tea Party groups.

An initial proposal by House Budget Committee chairman Paul Ryan of Wisconsin to slash $32 million from current spending was opposed in the House Republican caucus as too small. That plan called for an $8 billion increase for the Pentagon and homeland security and a $40 billion cut from domestic spending, and would have compelled some agencies to cut 20 percent or more.

House Republicans eventually agreed on a plan for $74 billion in cuts, which Ryan will formally introduce this coming week. It calls for a 9 percent reduction in non-military discretionary spending, including eliminating all federal funding for family planning services, the AmeriCorps national service program, high-speed rail services, the Legal Services Corporation, which provides legal assistance for the poor, and the Corporation for Public Broadcasting.

The budget for the Environmental Protection Agency would be slashed by a staggering 30 percent. Other cuts include:

· The Women, Infants and Children program, providing milk and other food for low-income pregnant women, mothers and young children, cut $758 million, about 10 percent

· Head Start preschool education, cut $1.1 billion, about 14 percent

· Community health centers, cut $1 billion

· The District of Columbia budget, cut $240 million, mainly from the Metro system.

There are moves in both the House and Senate to pass the 2011 Defense Appropriations Bill intact, which would effectively exempt the military budget from any cuts in the revised continuing resolution.

One month later, Congress must act to raise the ceiling on the national debt—another action that could have been taken by the previous Democratic Congress. House Republicans aim to use the debt ceiling vote as another means of compelling drastic cuts in spending.

A bipartisan group of at least 31 US senators is discussing plans for long-term austerity measures, including cuts in key entitlement programs like Social Security, Medicare and Medicaid. The organizers of this group, Democrat Mark Warner of Virginia and Republican Saxby Chambliss of Georgia, have been meeting with four senators who served on the Obama deficit commission that filed a report in December calling for major cuts in entitlements, in order to reach a consensus approach to making the sick and the elderly pay for a deficit which is caused by two wars, the bailout of Wall Street, and huge tax cuts for the wealthy.

Similar discussions are under way between the Obama White House and House Republican leaders. On February 9, Obama, Vice President Joseph Biden and chief of staff William Daley held a closed-door meeting with the three top Republicans, Speaker John Boehner, Majority Leader Eric Cantor and Majority Whip Kevin McCarthy, to discuss budget and regulatory issues, among others, without aides present.

The talks were conducted in the wake of a report by the Congressional Budget Office estimating that the federal deficit for the current fiscal year will grow to $1.48 trillion, up from $1.3 trillion in fiscal year 2010. For the following year, the CBO projects a deficit of $1.1 trillion. All these figures are indicators of financial bankruptcy, with the government deficit approaching 10 percent of US GDP in the current year, a level comparable to Greece.

Contrary to the mythology of the corporate-controlled media and both big business parties, the deficit is not the result of runaway spending on domestic social programs or entitlements. Federal tax receipts have plunged to only 14.8 percent of GDP, the lowest level in 60 years, in part because of the tax cuts for the rich, in part because of the economic slump.

World Socialist Web Site

Global Research Articles by Patrick Martin

© Copyright Patrick Martin, Global Research, 2011

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Mark Orr
15 Feb 11, 10:38
How can you blame Obama?

The poor and middle class were stupid enough to vote against him, so how can he not act accordingly. The poor are poor in many cases because they are stupid. Some are unlucky. But the fact is, enough voted for the GOP knowing full well they wanted tax cuts extended for the rich. So there you have it. The poor voted in favour of deepening their own poverty. Isn't democracy great?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in