Budget Blade Sharpened,Barack Obama’s Federal Budget

November 26, 2008

307_obama_presserPresident-elect Barack Obama had warned on Monday that he would begin detailing on Tuesday how he would make some of the “meaningful cuts” he is planning for the federal budget. “If we are going to make the investments we need, we also have to be willing to shed the spending that we don’t need,” Obama said. “We can’t sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness or exist solely because of the power of politicians, lobbyists or interest groups.”

Despite the rhetoric, however, the President-elect on Tuesday singled out only a single program for elimination — crop subsidies totaling $49 million that the Agriculture Department paid out to 2,702 millionaires apparently too rich to qualify for them between 2003 and 2006. But Obama also promised significant federal-budget surgery to come. While many incoming Presidents have made such promises, not one in the past two generations has had the crowbar of looming economic calamity available that Obama does to force major changes in the way Washington taxes and spends.

It may have been thin on details, but federal-budget hawks were pleased by Tuesday’s announcement of big cuts to come. “The signals he’s sending out are positive,” says Robert Bixby, executive director of the Concord Coalition, a grass-roots group that advocates federal-budget discipline. “I’m as encouraged as you can be in the face of a trillion-dollar deficit.” Bixby says Obama’s tone — and the message that he’s unwilling to pour federal dollars into combating the recession without assessing the merit of that spending — should help curb some appetites on Capitol Hill. “He talked about the need to cut wasteful government spending to make sure that taxpayers dollars are being spent efficiently,” Bixby said. “It sends an important signal to Congress that he’s not willing to yank the lid off and say, ‘Anything goes!’ ”

As Obama’s fledgling economic team bolts together a stimulus package that could cost the nation’s taxpayers upwards of half a trillion dollars, the President-elect said the old ways of building a federal budget — often piling additional billions onto hidebound programs of dubious value — are over. He pledged that his Administration would go through the federal budget “page by page, line by line, eliminating those programs we don’t need and insisting that those that we do need operate in a sensible, cost-effective way.” He referred to the “hard-pressed middle class” and declared that “their government is on their side” — a jibe at the Bush Administration’s preoccupation with restoring the fortunes of Wall Street.

Obama said his key challenge is finding a way to pump funds into the economy on a short-term basis in a manner that spurs long-term economic growth. He suggested that such twofers might include middle-class tax cuts, changes in the tax code and investments in health care. When pressed by an Illinois reporter on what he would say to his cash-strapped former colleagues and friends in Springfield, where Obama served as a state senator, the President-elect said the question reflected old thinking. “I want to be clear: friendship doesn’t [enter] into this,” he said. “That’s part of the old way of doing business.”

Obama also announced that he is tapping Peter Orszag, currently head of the Congressional Budget Office, to head the White House’s Office of Management and Budget, which coordinates federal spending.

The crashing economy has prompted Obama to begin acting presidential even before Inauguration Day. He has declared his intention to develop an economic stimulus package aimed at saving or creating 2.5 million jobs and promoting infrastructure improvements, environmentally friendly investments and health-care efforts, and he wants that package on his Oval Office desk for signing into law soon after he arrives at the White House. “We don’t intend to stumble into the next Administration,” Obama told reporters on Tuesday in Chicago. “We are going to hit the ground running.” But unlike on Monday, when Obama’s naming of his economic team accompanied a nearly 400-point boost in the Dow Jones industrial average, during Tuesday’s conversation with reporters, major market indicators slumped but later began to rise again. Investors, no doubt, will be paying close attention when Obama holds a third press conference in as many days on Wednesday.

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