Bloomberg News

Obama Budget Doubles Infrastructure Funds While Cutting Programs

February 16, 2012

(Updates with McConnell and Boehner comments starting in fourth paragraph. For more on the budget, see BUDG.)

Feb. 13 (Bloomberg) -- President Barack Obama would almost double spending on the U.S. infrastructure over the next six years and would pour $350 billion into a jobs plan while reducing the budgets of most other domestic agencies.

The blueprint for the fiscal 2013 budget released today would spend $476 billion through 2018 on highway, bridge and mass transit projects, funded in part by winding down the wars in Iraq and Afghanistan. It would cut some energy programs, farm subsidies and federal workers’ retirement plans, while bulking up the Securities and Exchange Commission and creating a panel to investigate unfair foreign trade practices.

Investing in the nation’s transportation grid is a fresh attempt to create jobs for a president facing re-election this year amid voter concern about the economy and unemployment at 8.3 percent in January. Republican congressional leaders rejected the proposal as a political program that wouldn’t do much to curb the deficit and has little chance of becoming law.

Senate Republican Leader Mitch McConnell of Kentucky called the proposal a “campaign document” designed to win votes rather than help the economy. “The president is shirking his responsibility to lead and using this budget to divide,” McConnell said in a statement. “It will make the economy worse.”

‘Gloomy Reflection’

House Speaker John Boehner called Obama’s budget plan “a gloomy reflection of his failed policies of the past” that is “bad for job creation, our economy, and America’s seniors.” Obama “offered a collection of rehashes, gimmicks, and tax increases,” Boehner, a Ohio Republican, said in a statement.

Obama said said the budget plan saves money where possible and spends where needed to bolster economic growth.

“I’m proposing some difficult cuts that, frankly, I wouldn’t normally make if they weren’t absolutely necessary,” Obama said in remarks at Northern Virginia Community College in suburban Washington. “What that allows us to do is to invest in the things that will help grow our economy right now. We can’t cut back on those things that are important for us to grow. We can’t just cut our way into growth.”

Obama proposed increasing spending on road and bridge infrastructure to create jobs. In addition to gasoline tax revenue, transportation spending would come from a $38.5 billion-a-year transfer from the fund that now goes to war spending.

Budget proposals for discretionary spending must adhere to August’s Budget Control Act, which imposed spending caps that the administration estimates will generate about $1 trillion in deficit reduction over the next decade.

Bearing Brunt

Because Social Security and Medicare benefits and many of the other mandatory programs that account for more than half of the federal budget are exempt from cuts, domestic agencies and the Defense Department would bear the brunt of reductions.

The White House had asked agencies to develop proposals spending 10 percent less than in fiscal 2011. “Meeting the spending targets in this budget meant some very difficult choices,” Obama wrote in a letter to Congress accompanying his budget.

“Every department will feel the impact of these reductions as they cut programs or tighten their belts to free up more resources for areas critical to economic growth,” the letter said.

‘Falls Exceptionally Short’

House Appropriations Committee Chairman Hal Rogers, a Kentucky Republican, said in an e-mailed statement that Obama’s proposal “falls exceptionally short in many critical areas -- including a lack of any substantive proposal for mandatory and entitlement spending reform.”

House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said yesterday on ABC’s “This Week” program that he is crafting an alternative budget that would drive down the deficit through an overhaul of Medicare. Ryan has proposed shifting Medicare to a voucher system, something the Obama administration and congressional Democrats oppose.

While most agency budgets would be frozen or cut, Obama proposed some new spending.

Obama’s six-year transportation proposal would expand inter-city passenger rail and adds new funding for road and bridge repair. The budget would also create a National Infrastructure Bank to lend money for infrastructure projects including a next-generation, wireless broadband network.

Boosting Economy

The budget includes about $350 billion aimed at boosting the economy, including $30 billion for school modernization and another $30 billion to help states retain teachers and first responders. The plan calls for an estimated $140.8 billion to spur research and development, including a 19 percent increase - - to $2.2 billion -- in spending on advanced manufacturing research and development.

As part of his short-term stimulus efforts, Obama today announced an $8 billion Community College to Career Fund proposal that would link businesses and community colleges to train as many as 2 million workers for jobs in high-growth, high demand industries.

Those areas include health care, advanced manufacturing, transportation, clean energy and information technology, according to the statement. The initiative, part of Obama’s Jan. 24 State of the Union speech, would be administered by the Departments of Education and Labor.

School Performance

Obama proposed $850 million for his Race to the Top program to improve school performance, a $301 million increase from fiscal 2012.

The regulators responsible for enacting much of the Dodd- Frank law’s financial-system overhaul would see gains under the president’s proposal.

The Securities and Exchange Commission would receive a 19 percent boost to $1.6 billion. With that $245 million addition, the agency would add 561 employees, including more examiners to focus on hedge funds and more enforcement staff. It also would use a special reserve fund to modernize its website, set up a repository for its planned markets-tracking system and update the EDGAR digital filing system.

The Justice Department also would receive an additional $55 million and create 328 positions to fight financial fraud, including new FBI agents and forensic accountants. The department would receive a total of $700 million to investigate and prosecute past crimes related to the financial crisis and possible future ones including securities and commodities fraud, and investment and mortgage foreclosure scams.

CFTC Budget

The proposal would again try to get $308 million for the Commodity Futures Trading Commission -- the same amount the president asked for last year. That would be a 50 percent increase from its current $205 million for the main U.S. regulator of the $708 trillion global swaps market after its budget was held almost flat for 2012.

The CFTC would increase its staff by 41 percent to prepare for what it estimates will be a tripling in the number of exchanges and trading platforms under its authority from 2011 to 2013.

Obama also requested $26 million and at least 50 people for a new panel to investigate unfair trade practices by nations including China.

The funds would go to establish an Interagency Trade Enforcement Center that would monitor and enforce trade agreements and laws, according to an administration official. Obama’s request coincides with Chinese Vice President Xi Jinping’s scheduled arrival today for a U.S. visit.

The president announced his intention to create the panel, which would include lawyers, researchers, analysts and agents supported by the Commerce Department and U.S. Trade Representative, in the State of the Union speech.

Obama proposed a $1.4 billion, or 3.2 percent, increase over 2012 discretionary levels for the Department of Housing and Urban Development. The $44.8 billion in proposed HUD funding includes $34.8 billion aimed at preserving rental housing assistance for an estimated 4.7 million low-income families.

Spending Cuts

The administration would eliminate funding for the National Drug Intelligence Center, a Johnstown, Pennsylvania-based component of the Justice Department championed by the late Representative John Murtha, a Pennsylvania Democrat.

The functions of the center, including producing drug- related intelligence reports, would be transferred to the Drug Enforcement Administration. The center received $20 million in fiscal 2012,

Obama’s 2013 Energy Department budget would cut more than $40 billion in tax breaks for oil, gas and coal companies over the next decade, echoing previously unsuccessful efforts to free up money for clean energy and energy conservation.

Alternative Energy

The cuts come in an energy budget that provides $27.2 billion in spending authority, a 3.2 increase over 2012, according to the budget summary. Where fossil fuels lose, renewable energy and conservation programs may gain, reflecting the administration’s continued commitment to alternative sources of energy amid Republican criticism about the collapse of Solyndra LLC.

Spending on food-stamp benefits is projected to fall 0.6 percent to $69.9 billion in 2013 as employment improves, according to the Agriculture Department.

Spending for the food-stamp component of the Supplemental Nutrition Assistance Program still would be the second-highest on record and 17 percent higher than in 2011, the government said in its forecast for Agriculture department spending.

Agriculture spending would rise 2.5 percent to $154.5 billion in the year starting Oct. 1 before cuts to crop subsidies kick in, beginning long-term reductions in aid to farmers. Ending so-called direct payments, paid to growers of major crops regardless of commodity prices, would save $22.7 billion through 2022, although spending for all subsidies would rise 20 percent to $12.1 billion in fiscal 2013.

Oil Tax Breaks

Obama renewed his proposal to cut more than $40 billion in tax breaks for oil, gas and coal producers in the next decade to spend more for conservation and alternative energy.

The Energy Department budget also includes $12 million for a multiyear research effort to reduce risks associated with hydraulic fracturing in shale formations. Pipeline safety would receive a 70 percent, or $64 million, increase.

Obama proposed a consolidation of job-creation programs. Spending for Labor Department discretionary programs would drop to $12 billion from $12.5 billion in 2011, the last time agencies had an enacted budget. Spending would rise for worker- protection programs.

EPA Funding

The budget would cut Environmental Protection Agency spending for the third straight year by trimming funding for water grants to U.S. states and Superfund clean-up programs.

The fiscal 2013 budget seeks $8.3 billion, which is $105 million below the current funding level for the agency, according to White House documents released today. If Congress approves the proposal, it would be the first time since 1994 that the agency’s budget was cut for three consecutive years.

--With assistance from Alan Levin, Jesse Hamilton, James Rowley, Carol Wolf, Eric Martin, Seth Stern, Alex Wayne, Lorraine Woellert, Lisa Caruso, Susan Decker and Jon Morgan in Washington. Editors: Bob Drummond, Jodi Schneider

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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