Budget Combines Deficit Reduction, Investments and Streamlining of Government

President Obama’s two-month-delayed, $3.4 trillion budget for fiscal 2014 released on Wednesday attempts to freshly challenge Republicans in Congress through trims in entitlement spending and domestic spending cuts combined with items more in keeping with his own agenda -- cancellation of sequestration, curbs on tax deductions used by the wealthy and investments in rebuilding the nation’s human capital and infrastructure.

“When it comes to deficit reduction, I’ve already met Republicans more than halfway,” Obama said in a speech in the White House Rose Garden, noting that the plan puts in writing the “balanced” approach he offered House Speaker John Boehner, R-Ohio, in talks last year. “I hope Republicans will come forward and show they’re as serious about the deficit as they claim to be.”

Billed as a tool for boosting the middle class and creating “a 21st century government,” the budget’s big-picture markers include $1.8 trillion in new deficit reduction over 10 years, which, the administration calculates, brings total deficit reduction to $4.3 trillion, or about the amount recommended for sustainability by several fiscal commissions. What’s unusual about the budget is the proposal for $580 billion in new revenues from capping tax deductions used primarily by the wealthy at 28 percent, and a $230 billion change in the consumer price index formula used to calculate benefits in Social Security and federal retirement.

Simultaneously while reducing the deficit, the budget proposes $50 billion for fiscal 2014 in new spending on roads, bridges and anti-poverty programs, as well as a $75 billion effort to partner with states to achieve universal preschool -- financed through a hike in the cigarette tax of 94 cents per pack.

The plan proposed $200 billion in discretionary spending cuts in defense and nondefense accounts, as well as 215 cuts and consolidations that would save $539 billion through 2023, for an overall ratio of $2 in spending cuts for every $1 in revenue, according to a morning briefing for reporters by White House officials. Cuts include trimmed federal retirement benefits and decreases in farm subsidies. The White House projects that the deficit would be reduced to 2.9 percent of gross domestic product by 2016. 

Acting Budget Director Jeffrey Zients noted during the briefing that the budget includes the fiscal cliff compromise offer and “turns the sequester off,” fully paying for all investments “without adding a dime to the deficit." The president, Zients added, is “showing a will to compromise and a commitment to putting the country on a sustainable fiscal path. But the country won’t prosper if its infrastructure is crumbling and workers lack the skills they need.”

In the areas of improving management and program integrity, the budget reviews past accomplishments in the administration’s Campaign to Cut Waste, including reductions in improper payments, consolidation of data centers, the move toward bulk purchasing under strategic sourcing and the Pentagon’s renewed Better Buying Initiative. It noted that 66 ideas for efficiencies generated by federal employees through the annual Securing Americans Value and Efficiency Awards have now been in the president’s budgets.

“Government has become increasingly complex,” the budget notes, “as agencies have been assigned new missions and duties in their service to the American people. At times, this has resulted in agencies with duplicative and overlapping responsibilities that have wasted taxpayer resources and made it harder for the public to navigate their government.”

Hence Obama reiterated a past request, which Congress ignored, for renewed authority to merge and reorganize agencies, beginning by combining agencies dealing with business and trade into a single department. “With more effectively aligned and deployed trade promotion resources, strengthened trade enforcement capacity, streamlined export finance programs and enhanced focus on investment in the United States,” the budget said, “the government could more effectively implement a strong, pro-growth trade policy.” A proposed new interagency program to create Promise Zones -- to help people in 20 of America’s cities hardest hit by the recession by way of tax credits and anti-crime measures-- will require “breaking down barriers within government to make sure we’re the best possible partner,” Cecilia Muñoz, director of the White House Domestic Policy Council, told reporters.

The budget also gives a shoutout to BusinessUSA.gov, the centralized, one-stop platform that uses information technology to make it easier for businesses to access services with “no wrong door” to help them grow and hire. In 2014, all federal agencies with business-facing capabilities will be participating.

The General Services Administration would undergo a realignment and streamlining of key functions to save an estimated $200 million over 10 years. Examples include consolidating reporting structures and creating greater consistency within GSA divisions. The budget also would restore GSA’s authority to fully use rental income by investing $1.3 billion in repair and maintenance of federal buildings.

Federal managers, the budget notes, will apply greater emphasis on sharing evaluation data across agencies through “interagency learning networks” of program, performance management and evaluation officials.

Obama’s strategy of offering some compromises with Republicans while pushing his own priorities drew mixed reactions on Capitol Hill, where he was scheduled to dine on Wednesday night with his opponents. “While the president has backtracked on some of his entitlement reforms that were in conversations that we had a year and a half ago, he does deserve some credit for some incremental entitlement reforms that he has outlined in his budget,” Boehner said in a statement. “But I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes.”

Anticipating such a reaction, National Economic Council Director Gene Sperling told reporters that Obama had sought to hit the “fiscal sweet spot” in way that “creates confidence that government is dealing with long-term fiscal challenge” while also focusing on “strengthening the recovery” and creating jobs that boosts U.S. competitiveness. “Contraction and austerity can be counterproductive,” he added.

Noting that Obama’s budget included proposals the president personally opposes -- such as the recalculation of the CPI for benefits -- Sperling said Republicans can’t treat budget talks “like an a la carte menu” and simply pocket offers made in expectation of a compromise.

Asked why Obama’s 2014 budget was late, Zients said that while “prime budget preparation season is November-December,” the holiday season’s fiscal cliff talks meant that “much was put on hold.” Budget planners had to wait for the Jan. 2 deal extending middle-class tax cuts and new discretionary spending caps for fiscal 2013 and 2014, he said. “We ramped up in the last couple of months, but then came the complexity around the sequester,” he said. “We’re happy to be rolling it out today.”