Obama to call for budget freeze

President Barack Obama announces economic initiatives for struggling middle class families, Monday, Jan. 25, 2010, in the Eisenhower Executive Office Building across from the White House in Washington. (AP Photo/Charles Dharapak)

In his State of the Union address tomorrow night, President Obama will propose a three-year freeze on many domestic programs. The measure would be aimed at reducing the federal deficit over the next ten years.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

But it would exempt security-related budgets for the Pentagon, foreign aid, the Veterans Administration and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.

Although the budget freeze will hit dozens of federal programs, the big-picture fiscal impact of the freeze will be minor.

The payoff in budget savings would be small relative to the deficit: The estimated $250 billion in savings over 10 years would be less than 3 percent of the roughly $9 trillion in additional deficits the government is expected to accumulate over that time.

Of course, the freeze won't stop government in it's tracks. Obama is working with Congress to develop a second stimulus package.

Administration officials also are working with Congress on roughly $150 billion in additional stimulus spending and tax cuts to spur job creation. But much of that spending would be authorized in the current fiscal year, the officials said, so it would not be affected by the proposed freeze that would take effect in the fiscal year beginning Oct. 1.

It's very early to say what the impact of all this might be for Philly. The second stimulus could be good for cities, if it includes money for programs specifically aimed at urban areas. But if the stimulus hand gives, the freeze hand might take away; many local agencies rely on federal dollars.

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