As President Barack Obama prepares to send his 2012 budget to Congress on Feb. 14, Administration officials have fanned out to offer tantalizing glimpses of the goodies it will contain, including help for cash-strapped state unemployment programs, a method for consumers to immediately claim a $7,500 tax credit on electric vehicles, a six-year, $53 billion program for construction of a national high-speed rail network, and new investment in high-speed wireless services. Now, both parties are waiting to hear how he plans to pay for it.
While the President has made clear he is determined to get a handle on the ballooning U.S. deficit, he has given few specifics. His only substantive proposal so far—a federal spending freeze that would yield $400 billion in savings over 10 years—underwhelmed congressional Republicans, some of whom have called for $100 billion in cuts this year alone. As House Speaker John Boehner prepared to go to the White House on Feb. 9 to meet with Obama, he said he expected the budget to be more of the same: "too much spending, too much taxing, and too much borrowing."
He may be in for a surprise. Obama's budget won't win him a lot of friends, say sources familiar with the document, which is likely to be shot through with deep spending cuts in domestic programs that Democrats cherish, including heating oil assistance to the poor. Budget Director Jacob J. Lew outlined in a Feb. 5 New York Times op-ed some $775 million in 2012 cuts, including $350 million from community services funding, $125 million from the Great Lakes Restoration Initiative, and $300 million from Community Development Block grants—all programs close to the President's heart. The Defense Dept.'s budget request, meanwhile, will reflect cuts of $13 billion, the first slice of $78 billion in reductions over five years that Lew's office asked the Pentagon to make. In the op-ed, Lew said Obama will extract some savings by eliminating such programs as Boeing's (BA) C-17 military cargo plane.
In a Feb. 8 interview, Lew signaled Obama wouldn't back a specific proposal for overhauling corporate taxes in the budget blueprint, though he plans to continue discussions with lawmakers and corporate executives. "The best way to get to a positive outcome is get broad agreement on the goals and work toward them," Lew said.
The bottom line: The Obama Administration's 2012 budget due out Feb. 14 may contain surprisingly austere spending cuts.