With the release of A New Era of Responsibility: Renewing America's Promise, the Obama Administration has set the parameters of debate in Congress for the foreseeable future. The document represents the Administration's spending plan for Fiscal Year 2010, which runs Oct. 1, 2009, to Sept. 30, 2010.

While we expect a more detailed document to be released by the White House in early April, this budget outline places the new Administration's priorities clearly into focus, as well as the financing options needed to accomplish these priorities. It represents a clear break from the previous Administration, and an aggressive change of course that Congress has yet to endorse.

This budget carries a price tag of $3.55 trillion, with about $1.12 trillion for discretionary spending. Big ticket items include a $650 billion "down payment on health care reform" financed with tax increases on Americans making over $250,000, combined with cost savings from Medicare, Medicaid and other health programs. Domestic spending will, for the first time in almost a decade, outstrip the rate of growth in defense, which will be held to an approximate four percent increase. A "Cap and Trade" system, under which companies must buy permits to exceed pollution emission caps, will be instituted to finance an extension of a two year tax credit that benefits low wage and middle income workers.

Altogether, new taxes of about $1.3 trillion are outlined in the measure which would effectively reinstate the top two Clinton-era tax rates of 36 and 39.6 percent. The outline includes $940.2 billion in tax breaks for working class families and targeted to assist new small business investment and research and development.

Beyond the numbers, the budget outline is President Obama's most detailed expression yet of his policy priorities, choosing to focus in four main areas: Health, Clean Energy, Education, and Infrastructure. In each, the Administration has sought to use technology to lower costs, bring accountability and transparency to spending, and encourage job growth within each sector.

When viewed in concert with the recently enacted American Recovery and Reinvestment Act, this budget outline follows a linear path and builds upon the same themes. It is also important to note that this document is not a finished blueprint, but represents an opening bid in the President's negotiations with the Congress.

Below are selected highlights from the Office of Management and Budget Executive Summary.

The Numbers

The 2010 base discretionary request is $1.13 trillion, an increase of $90.9 billion (8.0 percent) over the 2009 Bush base discretionary request of $1.041 trillion (adjusted to include 2009 requested Transportation obligation limitations). However, the request is only $71.2 billion (6.7 percent) over the likely-enacted amounts for FY 2009. Number includes "war funding" that previously had been excluded from other budgets. The Budget also provides a 10-year rather than a five-year look into our fiscal situation.  

Administration Priorities

  • HEALTH CARE
    • Transforming and modernizing the health care system by setting aside a reserve fund of more than $630 billion over 10 years that will be dedicated towards financing reforms in the American health care system. Funds will come from cutting waste, realizing efficiencies in Medicare and Medicaid and changing some upper-income taxes.
    • Reducing Medicare overpayments to private insurers through competitive payments and improving Medicare and Medicaid payment accuracy.
    • Reducing drug prices by accelerating access to more affordable generic versions of biologic drugs. This will be done through the establishment of a workable regulatory, scientific and legal pathway for generic biologic drug versions.
  • CLEAN ENERGY
    • Begin a comprehensive market-based approach to transform our energy supply and slow global warming. The President will work with Congress to implement a cap-and-trade system to reduce greenhouse gas emissions and generate revenue of $150 billion over 10 years that will go to develop clean energy technologies, industries, and jobs.
    • Modernize federal buildings and slash the federal government's energy use by 25 percent, adding upon the $4.5 billion provided in the Recovery Act to achieve the President's energy efficiency improvement goal by 2013.
    • Weatherize low-income homes, saving working families on average $350 per year.
    • Modernize the electric grid by building on efforts in the Recovery Act to create a new, smarter electric grid for the integration and use of greater amounts of renewable energy; increased utilization of innovative efficiency technologies; and a reduction in the electric congestion that costs ratepayers billions of dollars each year.
  • EDUCATION
    • Make a new investment in early childhood education by doubling funding for the Early Head Start program, expanding Head Start, and beginning a major new effort to ramp up the Nurse-Home Visitation program.
    • Expand Pell Grants and put the program on sure footing, indexing Pell grants to the Consumer Price Index plus 1 percent in order to account for inflation in this sector and making the Pell Grant program mandatory.
    • Triple the number of graduate fellowships in science, to help spur the next generation of home-grown scientific innovation.
  • INFRASTRUCTURE
    • Establish a National Infrastructure Bank to help modernize and upgrade our critical infrastructure.
    • Initiate a new federal commitment to high-speed rail, proposing a $1 billion a year high-speed rail state grant program, in addition to the $8 billion provided in the recovery plan.
    • Enhance security at over 90 major ports, to improve homeland security, increase international trade and commerce, and create jobs.
    • Invest in clean and safe drinking water with programs to fund over 1,000 clean water and nearly 700 drinking water projects annually based on average project costs.
    • Expand access to broadband by including $1.3 billion in USDA loans and grants for the Department of Agriculture to increase broadband capacity and improve telecommunication service, as well as education and health opportunities in rural areas.
    • Invest in the sciences with a 16 percent increase over 2008 funding levels for the National Science Foundation and other research agencies.

Tax Breaks

  • Make permanent the $800 "Making Work Pay" tax cut for 95 percent of America's working families while preserving all dedicated payroll taxes that go to Social Security and Medicare.
  • Continue to cut taxes for the families of millions of children through an expansion and continuation of the Child Tax Credit.
  • Make the $2,500 American Opportunity Tax Credit permanent to help kids afford college.
  • No tax increases for families making less than $250,000 a year while allowing tax rates to go back to Clinton-era levels for those at the top.
  • Make saving for retirement easier as the economy recovers by laying the groundwork for the future establishment of a system of automatic workplace pensions on top of and clearly outside of Social Security. This is expected to dramatically increase both the number of Americans who save for retirement and the overall amount of personal savings for individuals.
  • Help small businesses and innovative companies grow and create new jobs by eliminating capital gains for individuals on the gain from the sale of certain small business stocks held for more than five years and by making the Research and Experimentation Tax Credit permanent.

Honest Budgeting, Accountability and Fiscal Responsibility

  • Cut the deficit the President inherited by at least half by the end of his first term. The inherited deficit for 2009 is $1.3 trillion, or 9.2 percent of GDP, and will fall to $533 billion, or 3.0 percent of GDP by 2013.
  • Return to honest budgeting with a budget that provides a projected cost for overseas contingency operations, such as wars in Iraq and Afghanistan; recognizes the statistical likelihood of natural disasters instead of assuming that there will be no disasters over the next decade; assumes the full cost of fixing the AMT each year; and accounts for the fact that payments to Medicare physicians will not be drastically cut. This adds more than $2.5 trillion to our bottom line over 10 years.
  • Return to pay-as-you-go budgeting, by strengthening the budget enforcement rule with Congress that helped create the surpluses of a decade ago, the statutory pay-as-you-go rule.
  • Let Americans track how their tax dollars are spent, and make sure that taxpayer dollars are spent wisely in our large entitlement programs.