Obama to propose three-year freeze on some spending

President Barack Obama will propose a three-year freeze on federal spending outside of national security to save an estimated $250 billion over a decade as part of an effort to rein in record deficits, two administration officials said.

Obama will unveil his election-year fiscal strategy during his State of the Union address to Congress on Jan. 27. The limit on discretionary spending would reduce the deficit by $10 billion to $15 billion in 2011, according to the officials, who briefed reporters on the plan. Last year’s budget shortfall was a record $1.4 trillion.

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.

Obama is using his first formal State of the Union speech to emphasize his focus on spurring economic growth, job creation and imposing fiscal discipline on the federal government. With midterm elections to determine control of Congress in November, the president is confronting voter anger over taxpayer bailouts, government debt and a sluggish economy with 10 percent unemployment nationwide.

Earlier today, he and Vice President Joe Biden announced proposals for a package of tax cuts aimed at middle-income Americans that include an increased tax credit for child care and an expansion of tax credits to match retirement savings.

Threat to Growth

Federal deficits “threaten future job creation and economic growth,” Obama said Jan. 23 in a statement endorsing creating a commission to recommend steps to trim the budget shortfalls.

The administration officials, who briefed reporters on condition of anonymity, said the spending freeze is one element of the president’s plans for cutting the deficit. The proposal will be part of the budget plan for fiscal year 2011 that Obama is scheduled to submit to Congress Feb. 1.

The freeze covers non-security discretionary spending, which amounted to about $447 billion this year and represents about one-sixth of the $3.5 trillion federal budget. Spending on programs 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.

Spending Increases

Details won’t be disclosed until Obama sends his budget to Congress. Officials said that the freeze proposal isn’t across the board. Some departments and agencies would actually see their budget increase, suggesting others will be cut.

Programs that likely would get increases include initiatives on energy technology or where spending is deemed crucial to economic growth and job creation, officials said.

The plan is subject to approval by Congress, and the White House is braced for opposition, one of the officials said.

A spokesman for House Republican leader John Boehner of Ohio was critical of Obama’s plan.

“Given Washington Democrats’ unprecedented spending binge, this is like announcing you’re going on a diet after winning a pie-eating contest,” the spokesman, Michael Steel, said.