Obama to seek 3-yr freeze on spending

Written by Bloomberg | Updated: Jan 28 2010, 03:30am hrs
President Barack Obama will call in his State of the Union address for a three-year freeze on spending for many domestic programmes as part of his strategy to rein in the deficit, administration officials said.

The proposal, which wouldnt affect spending on national security, would save an estimated $250 billion over a decade and reduce the deficit by $10 billion to $15 billion in 2011, according to the two officials, who briefed reporters on the plan. Last years Budget shortfall was a record $1.4 trillion.

Obama will unveil the plan in his address to a joint session of Congress on Wednesday night and include it in the fiscal year 2011 Budget hes set to deliver to lawmakers Feb 1, the officials said.

In the State of the Union, the president will emphasise steps to spur economic growth and job creation as well as imposing fiscal discipline on the federal government. With midterm elections in November to determine control of Congress, the president is confronting voter anger over taxpayer bailouts, government debt and a sluggish economy with 10%unemployment nationwide.

We are going to have to be serious about the deficit in ways that we havent been before, Obama said on Monday in an interview with ABC News. We need a smarter government, not a bigger government, not a smaller government, we need a smarter government. And we dont have one right now.

The Environmental Protection Agency and the commerce, interior and justice departments are among the executive branch agencies subject to the freeze, officials said, while the defense department, department of homeland security, Veterans Affairs and unspecified international affairs programs would be exempt.

The administration officials, who briefed reporters on condition of anonymity, said the spending freeze is one element of Obamas plans for cutting the deficit. The freeze covers non-security discretionary spending, which amounted to about $447 billion this year out of a $3.5 trillion federal budget. Spending on programmes such as Medicare, Medicaid and Social Security, along with interest on the national debt, are set by law and make up the biggest portion of the budget.

The freeze in effect represents a cut in spending, after inflation is taken into account, the officials said. Still, they said that limit wont be imposed across-the-board. Some departments and agencies would actually see their budget increase, suggesting others will be cut.