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Obama's spending plan: Where the cuts are

By Charles Riley, staff reporter

NEW YORK (CNNMoney) -- President Obama's budget for 2012 takes a sharp knife to government spending, with proposed cuts that will reduce deficits by hundreds of billions of dollars over 10 years.

The cuts hit far and wide: airports, heat subsidies for the poor, water treatment plants and Pell grants are just some of the targets. In total, half of all government agencies would see their funding reduced from 2010 levels.

The bulk of the cuts are needed to support Obama's proposed five-year freeze on non-security discretionary spending, for $400 billion in savings. It's a small part of the federal budget, but one that is responsible for many popular government activities.

The president's budget, which is expected to meet tough resistance in Congress, would eliminate or reduce funding to a total of 200 government programs for savings of $33 billion in 2012 alone.

It was a "very difficult" budget, said White House budget chief Jacob Lew on State of the Union with Candy Crowley. "We have to make tough trade-offs."

In a move that is sure to anger Democrats from cold-weather states, the administration will propose cutting $2.5 billion from a program that helps low-income people pay their energy bills during periods of extreme weather.

The American Gas Association, an industry group that represents natural gas companies, predicts 3.2 million households, and 9 million individuals, would be affected.

Some parts of the Pell grant program are also on the chopping block. The budget will propose eliminating Pell grants for summer school, and making interest on federal loans for graduate students build up during school; currently, the interest tab doesn't start running until after graduation. The administration said that those cuts would help preserve the maximum Pell grant of $5,500.

According to the administration, the savings would be $8 billion dollars next year, and $60 billion dollars over 10 years.

The budget also laid out Obama's proposal to cut defense spending, a politically tricky area. Including spending on the wars in Iraq and Afghanistan, the 2012 defense budget would come in at more than 5% below 2011 request. Savings come from in part from a drawdown of forces in Iraq, and also from $78 billion in cuts identified by the Pentagon.

The budget proposed slashing a quarter of the government's funding for the Great Lakes Restoration Initiative -- a move that will save $125 million.

Obama is asking Congress to scale back a community service grant program, and cut a community development program that funds projects like housing, sewers and streets, and economic development. The two reductions will save around $650 million.

Taken as a whole package, the White House says its budget would cut deficits by $1.1 trillion over 10 years.

But before becoming law, the proposal will have to survive a marathon budget process, and House Republicans who favor far more severe cutbacks and Democrats in both chambers who think Obama went too far. To top of page

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