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Barack Obama unveils US budget plans for 2012 Barack Obama unveils US budget plans for 2012
(40 minutes later)
US President Barack Obama has unveiled his 2012 budget, describing the proposal as a "down payment" on future cuts to the US budget deficit.US President Barack Obama has unveiled his 2012 budget, describing the proposal as a "down payment" on future cuts to the US budget deficit.
The budget aims to cut $1.1tn (£690bn) from the US deficit over a decade.The budget aims to cut $1.1tn (£690bn) from the US deficit over a decade.
He said the US must live within its means and called for some reductions, but said "we can't sacrifice our future" with drastic cuts.He said the US must live within its means and called for some reductions, but said "we can't sacrifice our future" with drastic cuts.
Republicans, who control the House of Representatives, do not think the cuts go far enough in tackling the deficit.Republicans, who control the House of Representatives, do not think the cuts go far enough in tackling the deficit.
The speaker of the House of Representatives, Republican John Boehner, told US TV network NBC the proposed budget would "continue to destroy jobs by spending too much, borrowing too much and taxing too much".The speaker of the House of Representatives, Republican John Boehner, told US TV network NBC the proposed budget would "continue to destroy jobs by spending too much, borrowing too much and taxing too much".
Although Mr Obama is empowered to propose a budget, it is up to the US Congress to enact it into law and then to distribute the funds. Although Mr Obama is empowered to propose a budget, it is up to the US Congress to pass it into law and then to distribute the funds.
Mr Obama's budget is seen as an opening bid in a long process of negotiation with House and Senate leaders of both parties, and analysts say Republicans will press for deeper cuts. Mr Obama's href="http://www.whitehouse.gov/omb/budget" >proposed budget is seen as an opening bid in a long process of negotiation with House and Senate leaders of both parties, and analysts say Republicans will press for deeper cuts.
At a school in Baltimore on Monday morning, Mr Obama called for future investment in education, transportation infrastructure and high speed internet, "so that every American is equipped to compete with any worker anywhere in the world". It proposes total spending of $3.73tn in the 2012 budget year, which begins in October. That is a 2.4% reduction from the current year.
But he acknowledged that with the US government budget deficit expected to top $12tn through the next decade, some cuts and tax increases are needed. The proposal also largely ignores what analysts say is the country's most crushing budget burden: the Social Security retirement programme and the Medicare and Medicaid healthcare programmes for the elderly and poor.
Biggest impact
At a school in Parkville in the state of Maryland on Monday morning, Mr Obama called for future investment in education, transportation infrastructure and high speed internet, "so that every American is equipped to compete with any worker anywhere in the world".
President Barack Obama's budget is mostly a statement of his vision for government. It does not carry the weight of law. Indeed, Mr Obama's budget won't actually be voted on at all.
The US budget process is almost diabolically convoluted. The president's budget submission is a guide to his wishes, but the actual budget bill gets crafted by committees in the House and Senate. After those bills are passed by the full chambers, the House and Senate versions are reconciled into one bill that must be voted on again - tricky when different parties control each chamber.
That budget bill authorizes spending, but a separate bill, called an appropriations bill, is needed to actually release the funds to each department. The appropriations process is equally complicated, with various policy committees weighing in.
In the end, what gets passed may bear little resemblance to what Mr Obama proposed. That is particularly likely now that Republicans control the House budget committee. The process is so fraught that last year's appropriations have still not been passed.
Still, Mr Obama's budget is a key tool for communicating his priorities to voters. Even if it is never enacted, the budget will feed American perceptions of his economic management in the lead-up to 2012's presidential election.
But he acknowledged that with the US government budget deficit expected to top $12tn through the next decade, some cuts and tax increases were needed.
"While it is absolutely essential to live within our means - and while we are absolutely committed to working with Democrats and Republicans to find further savings and to look at a whole range of budget issues - we can't sacrifice our future in the process," he said."While it is absolutely essential to live within our means - and while we are absolutely committed to working with Democrats and Republicans to find further savings and to look at a whole range of budget issues - we can't sacrifice our future in the process," he said.
"We have a responsibility to invest in those areas that will have the biggest impact in our future.""We have a responsibility to invest in those areas that will have the biggest impact in our future."
The budget calls for a five-year overall cut in domestic non-defence spending, reducing that spending to the lowest level since the 1950s, Mr Obama said.The budget calls for a five-year overall cut in domestic non-defence spending, reducing that spending to the lowest level since the 1950s, Mr Obama said.
That would amount to about $400bn in reduced spending over the next decade. Republicans, meanwhile, have called for $100bn per year in spending cuts. That would amount to about $400bn in reduced spending over the next decade. Republicans, meanwhile, have called for $61bn in cuts to the remainder of the current fiscal year.
Among the programmes slated for cuts under his own plans are some that Mr Obama said he considered crucial, including development grants for poor neighbourhoods.Among the programmes slated for cuts under his own plans are some that Mr Obama said he considered crucial, including development grants for poor neighbourhoods.
Mr Obama also reiterated his call for $78bn in cuts to the defence budget. Mr Obama also reiterated his call for $78bn in cuts to the defence budget over five years.
"If we're going to walk the walk when it comes to fiscal discipline, these kinds of cuts will be necessary," he said."If we're going to walk the walk when it comes to fiscal discipline, these kinds of cuts will be necessary," he said.
He said he aimed to wring greater efficiency from government programmes and to sell 14,000 government office buildings and properties.He said he aimed to wring greater efficiency from government programmes and to sell 14,000 government office buildings and properties.
Recovery fears Other proposals include:
Analysts have questioned whether cutting $1.1tn will be enough.
  • A roughly 50% cut in heating bill assistance to poor families, saving $2.5bn
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  • A 25% cut to programmes for environmental conservation of the Great Lakes, saving $125m
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  • Raising $46bn over 10 years through elimination of tax breaks to oil, gas and coal companies
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  • A 58% increase in transportation spending, to $128.6bn
    •
"It's a lot less than the Republicans wanted to see," said Philip Poole, global head of macro investment at HSBC Global Asset Management in London. Analysts have questioned whether Mr Obama's proposal to cut $1.1tn will be enough.
"It's a start, it's a move in the right direction, but it's probably not enough in terms of what needs to be done ultimately, and it's not starting quickly enough." However, whereas countries such as the UK have imposed spending cuts to reduce their deficits, the Obama administration has said rapid, drastic spending cuts are not the way forward.
Whereas countries such as the UK have imposed spending cuts to reduce their deficits, the Obama administration has said rapid, drastic spending cuts are not the way forward.
"You got to make sure that you don't hurt the recovery and take too much risk that you damage the early expansion by shifting too prematurely to substantial restraints," Treasury Secretary Timothy Geithner said last month."You got to make sure that you don't hurt the recovery and take too much risk that you damage the early expansion by shifting too prematurely to substantial restraints," Treasury Secretary Timothy Geithner said last month.
Long process The US is one of only two G20 countries which expects its deficit to rise, not fall, this year. The deficit is predicted to increase to $1.645tn in the 2011 financial year, then drop to $1.1tn in 2012.
The US is one of only two G20 countries which expects its deficit to rise, not fall, this year.The deficit is predicted to increase to $1.645tn in the 2011 financial year, then drop to $1.1tn in 2012.
If this was achieved it would cut the deficit as a share of the US economy to 3.2% by 2015 from 10.9% this year,If this was achieved it would cut the deficit as a share of the US economy to 3.2% by 2015 from 10.9% this year,
The proposed $1.1tn budget reductions are much greater than the $400bn of cuts in non-essential programmes the president unveiled in his State of the Union address last month.The proposed $1.1tn budget reductions are much greater than the $400bn of cuts in non-essential programmes the president unveiled in his State of the Union address last month.
Mr Obama was also expected to propose an $18bn plan to improve high-speed internet access, and a further $8bn for high-speed railways.