Obama: Ready for 'tough cuts'

Big spending cuts in Obama debt planPresident Obama, shown here in January, would build on 2011 spending cuts now before Congress. By Charles Riley, staff reporter


NEW YORK (CNNMoney) -- President Obama has got the spending cut religion.

His new debt plan takes the blockbuster spending cuts working their way through Congress, embraces them, and then cuts even more.

And we all know how easy that was.

Obama's new plan doesn't name programs or services to be cut, but calls for a reduction of more than $1 trillion in non-security spending over 12 years.

Discretionary accounts, which require annual funding from Congress, will be hardest hit. Obama would reduce spending in that small part of the budget by a total of $770 billion. An additional $360 billion would be stripped from mandatory accounts.

The whole plan, which includes reforms to the tax code, as well as entitlement programs like Medicare and Medicaid, would cut $4 trillion in deficits. (Read the speech here.)

"This is bigger picture stuff," said Donald Marron, the director of the Tax Policy Center and a former acting director of the Congressional Budget Office. "The debate has changed."

Accused by many fiscal experts of offering a 2012 budget proposal that failed to make hard choices, it's now clear that Obama does want to cut spending. But he wants to do it on his own terms.

"We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs," Obama said Wednesday.

That's the new Obama spending cut mantra.

He won't have to wait very long. Congress is working to put a bill on his desk by the end of the week that will set spending levels $38 billion lower than the start of the fiscal year.

Once that becomes law, Obama wants to cut even more, reducing non-security discretionary spending to levels proposed by his bipartisan fiscal commission. The administration says that would mean additional savings of $200 billion.

And the $400 billion five-year freeze in non-security discretionary spending Obama proposed in his 2012 budget request is still on the table.

That all means a lot less funding in a part of the budget that contains social safety net programs and the types of investments in infrastructure and technology Obama says the country needs to stay competitive.

According to Isabel Sawhill, an economist who studies fiscal issues at the Brookings Institution, funding reductions of the size proposed by Obama will start cutting into bone.

"There is no way we can cut this deeply and not hurt both the investments and low-income families," Sawhill said.

Mandatory programs -- which don't need annual authorization from Congress to spend -- will be cut or reformed for savings of $360 billion.

That will mean changes in agricultural subsidy programs, the federal pension insurance system and the federal unemployment insurance trust fund, as well as other changes proposed by the bipartisan fiscal commission.

One budget area where Obama's plan falls short of the fiscal commission's recommendations is in military spending.

Obama is calling for growth in baseline security spending to remain below inflation, a move the White House estimates would save $400 billion over the next 12 years. That's less in savings than his debt commission achieved.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,790.51 112.61 0.68%
Nasdaq 4,473.30 20.51 0.46%
S&P 500 1,961.94 11.12 0.57%
Treasuries 2.27 -0.01 -0.26%
Data as of 3:02pm ET
Company Price Change % Change
Ford Motor Co 13.79 -0.61 -4.24%
Microsoft Corp 45.97 0.95 2.11%
Apple Inc 104.92 0.09 0.08%
Bank of America Corp... 16.65 0.05 0.30%
Yahoo! Inc 43.52 0.92 2.16%
Data as of 2:47pm ET

Sections

Honda CEO, Chairman and 11 other executives take pay cuts after company hit by recall failures. More

With oil and gas prices falling, some in Washington are questioning whether it makes sense to hold 106 days worth of supply in storage. More

Many AT&T U-Verse customers across the country woke up to an emergency alert on their TVs. More

Using technology developed for the military and implemented in Iraq, schools have installed alarm systems that detect gunfire. More

Big purchases often come with big expectations. So it's no wonder that in a recent survey 80% of homebuyers said they regretted at least one thing about their home. Here are ways to improve those odds. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.