IN a little over a week, President Obama will send Congress his budget for the 2012 fiscal year. The budget is not just a collection of numbers, but an expression of our values and aspirations.
As the president said in his State of the Union address, now that the country is back from the brink of a potential economic collapse, our goal is to win the future by out-educating, out-building and out-innovating our rivals so that we can return to robust economic and job growth.
But to make room for the investments we need to foster growth, we have to cut what we cannot afford. We have to reduce the burden placed on our economy by years of deficits and debt.
When I left the Office of Management and Budget in January 2001, the country had a projected surplus of $5.6 trillion over the next decade. When I returned last November, decisions to make two large tax cuts without offsetting them and to create a Medicare prescription drug benefit without paying for it, combined with the effects of the recession, meant that the nation faced projected deficits of $10.4 trillion over the next decade.
We cannot win the future, expand the economy and spur job creation if we are saddled with increasingly growing deficits.
That is why the president’s budget is a comprehensive and responsible plan that will put us on a path toward fiscal sustainability in the next few years — a down payment toward tackling our challenges in the long term.
This starts with doing what families and businesses have been doing during this downturn: tightening our belts. In the budget, the president will call for a five-year freeze on discretionary spending other than for national security. This will reduce the deficit by more than $400 billion over the next decade and bring this category of spending to the lowest share of our economy since Dwight Eisenhower was president.
Make no mistake: this will not be easy. It will require tough choices since every decision to invest in one program will necessitate a cut somewhere else. In each of the past two years, the administration has put forward about $20 billion in savings from ending some programs and reducing funds for others.
This entailed finding programs that were duplicative, outdated and ineffective. But to achieve the deeper cuts needed to support this spending freeze, we have had to look beyond the obvious and cut spending for purposes we support. We had to choose programs that, absent the fiscal situation, we would not cut.
Since they were instituted, community service block grants have helped to support community action organizations in cities and towns across the country. These are grassroots groups working in poor communities, dedicated to empowering those living there and helping them with some of life’s basic necessities. These are the kinds of programs that President Obama worked with when he was a community organizer, so this cut is not easy for him.
Yet for the past 30 years, these grants have been allocated using a formula that does not consider how good a job the recipients are doing. The president is proposing to cut financing for this grant program in half, saving $350 million, and to reform the remaining half into a competitive grant program, so that funds are spent to give communities the most effective help.
Another difficult cut is a reduction of $125 million, or about a quarter of current financing, to the Great Lakes Restoration Initiative, which supports environmental cleanup and protection. And a third is a reduction in the Community Development Block Grant program. These flexible grants help cities and counties across the nation finance projects in areas like housing, sewers and streets, and economic development in low- and moderate-income neighborhoods.
While we know from mayors and county leaders how important these grants are for their communities, and are very aware of the financial difficulties many of them face, the sacrifices needed to begin putting our fiscal house in order must be broadly shared, and we are proposing to cut this program by 7.5 percent, or $300 million.
These three examples alone, of course, represent only a small fraction of the scores of cuts the president had to choose, but they reflect the tough calls he had to make. And as he made them, his administration tried to make sure that there was no undue burden on any one program or area. We also asked agencies outside the freeze to do their part as well. The Department of Defense, for instance, will have its financing plan cut by $78 billion over the next five years, bringing spending down to zero real growth after a decade of healthy increases, and we are eliminating programs like the C-17 transport plane that have broad support but that we do not need and cannot afford.
Discretionary spending not related to security represents just a little more than one-tenth of the entire federal budget, so cutting solely in this area will never be enough to address our long-term fiscal challenges. That is why President Obama made clear in the State of the Union that he wants to work with Congress to reform and simplify our tax code. He also called for serious bipartisan cooperation to strengthen and protect Social Security as we face the retirement of the baby boom generation.
We must take care to avoid indiscriminate cuts in areas critical to long-term growth like education, innovation and infrastructure — cuts that would stifle the economy just as it begins to recover. That, in turn, would deprive us of one of the most powerful drivers of deficit reduction, a growing economy.
Next week, a debate will begin in Washington and throughout our country about the best way forward. The Obama administration will come to these discussions with a responsible, sensible and achievable plan to put the country on a fiscally sustainable path. The plan will incorporate many tough choices and deep cuts — as well as smart investments — to broaden our recovery, spur job creation and prepare the United States to win in the world economy.
Jacob Lew is the director of the White House Office of Management and Budget.
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