Obama Unveils the Proposed 2011 Budget

From Yunji de Nies and Sunlen Miller:

President Obama defended the proposed Fiscal Year 2011 budget he will send to Congress today for having to spend money to save the country from an even worse economic outlook.

“When I first walked through the door, the deficit stood at $1.3 trillion, with projected deficits of $8 trillion over the next decade,” the President said from the Grand Foyer, “One year ago our country was in crisis:  We were losing nearly 700,000 jobs each month, the economy was in a freefall and the financial system was near collapse.  Many feared another Great Depression. So we initiated a rescue, and that rescue was not without significant costs.  It added to the deficit as well.”

While the Administration now presents a budget with a 1.267 trillion budget deficit representing 8.3 percent of the gross domestic product, the President says the time to tighten the country’s collective belts is now.

“We have to do what families across America are doing: save where we can so that we can afford what we need,” he said.

That’s why the budget includes new tax cuts for small business investments, tax credits for those that hire new workers, and tax breaks in the area of energy investments, as well as significant spending in clean energy development. The President said he also wants to increase education spending by more than six-percent.

“This funding is tied to reforms that raise student achievement, inspire students to excel in math and science, and turn around failing schools which consign too many young people to a lesser future, because in the 21st century there is no better anti-poverty program than a world-class education,” the President said.

The President said the administration has gone through each federal department’s spending and cut items they deem wasteful.  That action has led to $17 billion in cuts last year, and $20 billion this year.  Some of the cuts were easy to make.  The President cited a program that pays for mine clean up, for mines that have already been cleaned up.  But others are more challenging. The President spoke about a program that funds environmental clean-up of abandoned buildings, an endeavor he supports, but says can find funding in other sectors.

“I'm willing to reduce waste in programs I care about, and I'm asking members of Congress to do the same,” the President challenged. “Like any business, we're also looking for ways to get more bang for our buck by promoting innovation and cutting red tape.”

Mr. Obama believes one of the best way to make the right cuts is through a bipartisan fiscal commission, which would come up with deficit-reduction proposals over the medium and long term.  The President called on Republican leadership in the House and Senate, which had opposed the idea, to embrace it.

The Administration also plans to restore “pay-as-you-go,” what the President called “a simple rule that says Congress can't spend a dime without cutting a dime elsewhere. This rule helped lead to the budget surpluses of the 1990s, and it's one of the most important steps we can take to restore fiscal discipline in Washington.”

The President ended with a simple bottom line.

“We simply cannot continue to spend as if deficits don't have consequences, as if waste doesn't matter, as if the hard-earned tax dollars of the American people can be treated like Monopoly money, as if we can ignore this challenge for another generation,” he said, “We can't.”

Mr. Obama was flanked by his top financial advisors: Treasury Secretary Timothy Geithner, Director of the Office of Management and Budget, Peter Orszag, Chair of the Council of Economic Advisors, Christina Romer, and Director of the National Economic Council, Larry Summers.

At a subsequent briefing with reporters, Christina Romer said that the administration believes the unemployment rate will continue to hover around 10-pecent throughout 2010.  She projects that 2010 will end with the unemployment rate at 9.8%, 2011 at 8.9% and 2012 at 7.9%.

- Yunji de Nies and Sunlen Miller: