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Lew Previews Obama Budget Cuts

OMB Director Jack Lew offered a preview of the Obama Administration budget for fiscal year 2012, which highlights small, unimportant trims to the budget in an effort to tease out Republican aims. Lew rightly highlights two large tax cuts and the recession as the culprit for the deficits the nation faces in the long term; he forgot two wars (and the fact that his boss helped extend those tax cuts for two more years). But Lew will not offer more than a “down payment” on budget balancing, with that five-year freeze on nonsecurity discretionary spending. Here are some of the specifics:

Since they were instituted, community service block grants have helped to support community action organizations in cities and towns across the country. These are grassroots groups working in poor communities, dedicated to empowering those living there and helping them with some of life’s basic necessities. These are the kinds of programs that President Obama worked with when he was a community organizer, so this cut is not easy for him.

Yet for the past 30 years, these grants have been allocated using a formula that does not consider how good a job the recipients are doing. The president is proposing to cut financing for this grant program in half, saving $350 million, and to reform the remaining half into a competitive grant program, so that funds are spent to give communities the most effective help.

Another difficult cut is a reduction of $125 million, or about a quarter of current financing, to the Great Lakes Restoration Initiative, which supports environmental cleanup and protection. And a third is a reduction in the Community Development Block Grant program. These flexible grants help cities and counties across the nation finance projects in areas like housing, sewers and streets, and economic development in low- and moderate-income neighborhoods.

While we know from mayors and county leaders how important these grants are for their communities, and are very aware of the financial difficulties many of them face, the sacrifices needed to begin putting our fiscal house in order must be broadly shared, and we are proposing to cut this program by 7.5 percent, or $300 million.

The examples given, then, are to cut community action funding, community development block grants, and restoring the Great Lakes.

I guess my reaction is to wonder what it is you’re trying to accomplish in the budget. Communities, particularly the nation’s inner cities, have borne the brunt of the economic crisis. They have seen mass unemployment erode their local budgets and leave their infrastructure to rot. Their low-income residents have few options to pool their voices and generate political power. Yet two of the three programs listed for cuts are community development and community action. I’m sure this will deflect all that criticism that Obama is a Muslim community activist trying to funnel “slush fund” money to undeserving people and start a race war.

This is all theoretical, of course. An Administration budget represents an opening bid, not something that will be automatically passed into law. The White House could highlight anything it wanted to for cuts – Ag subsidies, corporate tax expenditures that lead to outsourcing, literally whatever it wants. Yet there are areas of the budget that seem to have a force field around them. Lew says the Administration will implement the $78 billion in cuts from the Defense Department over five years, but this only slows the growth of the Pentagon budget (he calls it “zero real growth,” which is pretty weaselly). He highlights investments in infrastructure, education and innovation, but mainly as an afterthought. And, pre-empting the catcalls from the peanut gallery about going after the real growth areas of the budget, Lew offers this paragraph:

Discretionary spending not related to security represents just a little more than one-tenth of the entire federal budget, so cutting solely in this area will never be enough to address our long-term fiscal challenges. That is why President Obama made clear in the State of the Union that he wants to work with Congress to reform and simplify our tax code. He also called for serious bipartisan cooperation to strengthen and protect Social Security as we face the retirement of the baby boom generation.

And with that, Lew puts Social Security on budget in a rhetorical sense. Social Security has had its on dedicated funding stream for the life of the program and has not contributed one penny to the deficit in 75 years.

So this is the landscape of the budget fight: one side (the Republicans) talk a good game but don’t actually want to cut a heck of a lot; the other side (the White House) will prioritize cuts to the community over the corporate, even though overall the cuts are symbolic as well.

I’m sure they can come to an accommodation.

…just to add, I’d like to see a graph of the socio-economic status of the people who receive direct or indirect aid from the bucket of “non-security discretionary spending” in the federal budget. I think you’d find it poorer, less white and more urban than the rest of the budget.

UPDATE: Stan Collender seems to think this was designed to arouse Republican governors and mayors wary of cuts to their states. I’d say that Republican mayors have no juice with Republican members of Congress, and Republican governors of the recently elected variety are so determined to cut that they won’t care a bit.

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David Dayen

David Dayen