Obama official says new budget won't be pain-free

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - President Barack Obama will send Congress on Monday a $3 trillion-plus budget for 2012 that promises $1.1 trillion in deficit reduction over the next decade by freezing many domestic programs for five years, trimming military spending and limiting tax deductions for the wealthy.

Jacob Lew, the president's budget director, said Sunday that the new spending plan for the 2012 would disprove the notion that "we can do this painlessly ... we are going to make tough choices."

Republicans rejected that appraisal, castigating Obama for proposals that will boost spending in such areas as education, public works and research, and charging that Obama's cuts are not deep enough.

They vowed to push ahead with their own plans to trim $61 billion in spending from the seven months left in the current budget year and then squeeze Obama's 2012 budget plan for billions of dollars in additional savings in response to voters alarmed at an unprecedented flood of red ink.

"He's going to present a budget tomorrow that will continue to destroy jobs by spending too much, borrowing too much and taxing too much," House Speaker John Boehner said on NBC's "Meet the Press."

Boehner released a statement from 150 economists calling on Obama to take immediate action to reduce government spending.

"He's going to present a budget that will continue to destroy jobs by spending too much, borrowing too much and taxing too much."

Lew, appearing on CNN's "State of the Union," rejected criticism that the $1.1 trillion deficit-cutting goal fell far short of the $4 trillion in deficit cuts outlined by the president's own deficit commission in a plan unveiled last December. That proposal would attack the biggest causes of the deficits - spending on the benefit programs Medicare, Medicaid and Social Security - and defense spending.

Obama's budget avoided the painful choices put forward by the commission on benefit programs. Lew said it would be a mistake to say the report did not have an impact on the president's proposals.

He cited a proposal to pay for keeping doctors' payments under Medicare from being cut sharply. Instead of borrowing the money to prevent those cuts, the administration was putting forward $62 billion in savings in other areas to prevent those cuts over the next two years, Lew said.

In addition, the administration is reviving a proposal Congress rejected last year to limit tax deductions the wealthy can get for charitable donations, mortgage interest payments and state and local taxes, and using those savings to pay for keeping the Alternative Minimum Tax from hitting more middle-class families over the next two years.

An administration official, who spoke on condition of anonymity before the budget was released, said one-third of the $1.1 trillion in deficit reduction the administration is projecting over the next decade would come from additional revenue with the bulk of that reflecting the limitations on tax deductions by the wealthy.

The administration has said that its five-year freeze will save $400 billion over the next decade, with many programs slated for even bigger cuts.

Community development block grants would be trimmed by $300 million, the government's program to help low-income people pay their heating bills would be cut in half for a savings of $2.5 billion, and a Great Lakes environmental restoration program would but cut by 25 percent to save $125 million, according to an Office of Management and Budget summary.

That document also said that the budget would cut the Pentagon's spending plans over the next decade by $78 billion with reductions in various weapons programs deemed unnecessary including the C-17 aircraft, the alternative engine for the Joint Strike Fighter aircraft and the Marine expeditionary vehicle.

The OMB document also listed $1 billion in cuts in grants for large airports, almost $1 billion in a reduction in support to states for water treatment plants and other infrastructure programs and savings from consolidating public health programs run by the Center for Disease Control and various U.S. Forest Service programs.

The administration will also propose saving $100 billion from Pell Grants and other higher education programs over a decade through belt-tightening, with the savings used to keep the maximum college financial aid award at $5,550, according to an administration official who spoke on condition of anonymity in advance of the budget's Monday release.

The OMB summary said that the $1.1 trillion deficit savings would reduce the deficit as a percentage of the total economy to 3 percent of GDP by the middle of this decade.

The deficit is projected by the Congressional Budget Office to surge to an all-time high of $1.5 trillion this year, which would be 9.8 percent of the economy and mark the third consecutive $1 trillion-plus budget gap.

The surging deficits reflect the deep 2007-2009 recession, which cut into government tax revenues as millions were thrown out of work and prompted massive government spending to jump-start economic growth and stabilize the banking system.

Republicans scored significant victories in the November elections by attacking the soaring deficits while the Obama administration argued that the spending was needed to keep the country from falling into an even deeper economic slump.

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Associated Press writers Jim Kuhnhenn, Darlene Superville and Andrew Taylor contributed to this report.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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