Cut and Invest

A Budget that Cuts and Invests

This morning, as President Obama releases his budget, it's clear that his strategy is one best labeled "cut and invest." Jackie Calmes in The New York Times describes it:

The budget reflects Mr. Obama’s cut-and-invest agenda: It creates winners and big losers as he proposes to slash spending in some domestic programs to both reduce deficits and make room for increases in education, infrastructure, clean energy, innovation and research to promote long-term economic growth and global competitiveness.

The president is unveiling his budget to emphasize one of the winners: He will do so on Monday morning during a visit to a middle school and technology center in Baltimore.

Among the losers are programs that Mr. Obama has supported, even expanded, in the past: Popular programs for home-heating aid to poor families and for community services block grants would be cut in half, and a multi-state Great Lakes cleanup project would lose a quarter of its money compared to 2010.

Pell grants for needy college students would be eliminated for summer classes, and graduate students would start accruing interest immediately on federal loans, though they would not have to pay until after they graduate; both changes are intended to help save $100 billion over 10 years to offset the costs of maintaining Pell grants for 9 million students, according to administration officials.

Officials contrast the administration’s budgetary approach with that of House Republicans, who are voting this week to slash the current year’s spending by much larger amounts, sparing few programs from cuts and increasing spending on none.

“The debate in Washington is not whether to cut or to spend,” said a senior administration official on Sunday, speaking on condition of anonymity to brief reporters on the budget in advance of Mr. Obama’s Monday announcement of the spending plan. “We both agree we should cut. The question is how we cut and what we cut.”

There are some cuts that should be obvious, and the President outlined them in his State of the Union. Eliminating fossil fuel subsidies, for example, starts the list of corporate welfare that should be phased out. For more on a cut and invest strategy, I recommend reading Dr. Robert Shapiro's paper from 1997 entitled, "Cut and Invest to Grow." As the strategy around the budget becomes clearer over the coming days, it will ring familiar.

The underpinning for much of the Clinton era economic strategy, "cut and invest" is even more important now, following 8 years of economic and fiscal mismanagement coupled with a recession that was tough on the fiscal picture. No one should miss the irony in OMB Director Jack Lew's White House Whiteboard talk today, when he notes that there was a budget surplus last time he held that job.

For more on the budget, please join NDN and the New Policy Institute this Friday, as Rob Shapiro leads a discussion with budget expert Stan Collender, Brookings' William Gale, and AEI's Kevin Hassett.

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