US News

Job focus wins, moon programme loses in Obama's 2011 budget (Roundup)

By Chris Cermak Feb 1, 2010, 17:24 GMT

US President Barack Obama (L) delivers remarks on the budget for the fiscal year of 2011 (FY2011), beside Director of the Office of Management and Budget (OMB), Peter Orszag (R), in the Grand Foyer of the White House in Washington, DC, USA, 01 February 2010. EPA/MICHAEL REYNOLDS

Washington - US President Barack Obama on Monday offered up a 3.8-trillion-dollar government budget for the 2011 fiscal year designed to revive a struggling labour market and start tackling a skyrocketing budget deficit.

The budget for fiscal 2011 that begins October 1 shows an ongoing focus on economic recovery and job creation, as well as efforts to trim spending with a three-year freeze on non-security discretionary spending, which makes up just under a third of all spending.

'We won't be able to bring down this deficit overnight given that the recovery is still taking hold and families across the country still need help.' Obama said. The administration was now working to 'save what we can so that we can afford what we need.'

Perhaps the most high-profile victim of Obama's money-saving proposals is NASA's effort to return astronauts to the moon, one of more than 120 spending programmes being axed.

The budget would eliminate the Constellation programme that has been working to design a spacecraft to replace the ageing space shuttle. In its stead, it would create a competition for private space flight, offering 6 billion dollars over five years in incentives.

Killing a programme that is seen as a point of national pride could hit strong resistance in Congress. The effort had faced huge budget shortfalls and likely delays in achieving its goals.

Obama's plans include 100 billion dollars for job creation, including 33 billion dollars in tax cuts for small businesses and infrastructure and clean energy investments. In total the budget includes some 300 billion dollars in tax cuts.

Unemployment sits at a quarter-century high of 10 per cent. Even with the job proposals, Obama's economic adviser Christina Romer projected the jobless rate would remain stuck at 9.8 per cent at the end of this year and fall to 8.9 per cent by the end of 2011.

Obama proposes spending 708 billion dollars on defence, including 159.3 billion dollars for the wars in Iraq and Afghanistan, in a modest increase over the previous year.

There is also an additional 33 billion dollars in a supplemental request for the current year's troop surge in Afghanistan. Obama announced the buildup of 30,000 troops in December.

The federal budget deficit is expected to reach a record 1.6 trillion dollars, or 10.6 per cent of gross domestic product (GDP), this year, and decline slightly to 1.3 trillion dollars, or 8.3 per cent of GDP, in 2011.

While the budget includes some measures to reduce the country's massive debt levels, the administration still foresees a federal budget deficit of nearly 4 per cent of GDP in 2015, higher than the administration would like.

Obama said it would take a bipartisan effort to go the rest of the distance. He urged Republicans to 'fully embrace' his plan to create a fiscal commission that would make recommendations on where to cut spending in the coming years.

Lawmakers from both parties expressed concerns over Obama's proposals, with fellow Democrats worried that spending cuts could strangle the recovery and Republicans complaining it does not do enough to bring the country's fiscal house in order.

'I'm worried that you'll have just enough policy to allow rhetoric of fiscal responsibility, but the substance won't be about fiscal responsibility,' said congressman Paul Ryan, the top Republican on the budget committee in the House of Representatives.

Obama proposes to use the power of the purse to tax banks that benefited from the unpopular 700-billion-dollar government bail-out with a 'financial crisis responsibility fee' designed to raise 90 billion dollars over 10 years. It also would end tax cuts enacted under former president George W Bush for those making more than 250,000 dollars.

Spending for anti-terrorism efforts in the Department of Homeland Security includes 734 million dollars for 1,000 advanced screening machines for airports.

Obama also plans to cut more than 40 billion dollars-worth of subsidies for fossil fuel producers, instead investing in cleaner alternatives including another 36 billion dollars in loan guarantees for nuclear power plants, a controversial source pushed hard by opposition Republicans.

The budget also envisions lawmakers passing some version of controversial health reforms designed to rein in costs in the ballooning health-care sector. The legislation has been stuck in Congress throughout the past year.