President Barack Obama has proposed a $3.8 trillion budget for fiscal 2014 that aims to slash the deficit by a net $600 billion over 10 years, raise taxes and trim popular benefit programs, including Social Security and Medicare. The White House claims deficit reductions of $1.8 trillion, but Obama's proposal would negate more than $1 trillion in automatic spending cuts that started in March. Those cuts average 5 percent for domestic agencies and 8 percent for the Defense Department this year.
The agency-by-agency breakdown:
Total Spending: $145.8 billion
Percentage Change from 2013: 5.9 percent decrease
Discretionary Spending: $21.5 billion
Mandatory Spending: $124.4 billion
Highlights: Similar to years past, Obama's budget proposes savings by cutting farm subsidies. The proposal envisions a $37.8 billion reduction in the deficit by eliminating some subsidies that are paid directly to farmers, reducing government help for crop insurance and streamlining agricultural land conservation programs.
The Obama administration says many of these subsidies can no longer be justified with the value of both crop and livestock production at all-time highs. Farm income is expected to increase 13.6 percent to $128.2 billion in 2013, the highest inflation-adjusted amount in 40 years.
Obama and his Republican predecessor, President George W. Bush, have proposed similar cuts every year and Congress has largely ignored them. There is congressional momentum for eliminating some subsidies paid directly to farmers this year, though, as farm-state lawmakers search for ways to cut agricultural spending and pass a five-year farm bill. There is less appetite among lawmakers to cut crop insurance.
The budget also would overhaul the way American food aid is sent abroad, a move largely anticipated by farm and food aid groups. The United States now donates much of its food aid by shipping food overseas, a process many groups say is inefficient. The budget would transfer the money used to ship the food to cash accounts at the United States Agency for International Development. The administration says that would help 2 million more people annually and save an estimated $500 million over 10 years. Farm and shipping groups are strongly opposed to the idea.
The bulk of the USDA budget is dollars for the Supplemental Nutrition Assistance Program, or food stamps, which are expected to cost around $80 billion in the 2014 budget year. Costs for the program have more than doubled during Obama's presidency, driven by an ailing economy and an expansion of the benefit in 2009. Conservatives have called for cutting or overhauling food stamps, but the budget says the Obama administration strongly supports the current program "at a time of continued need."
Total Spending: $11.7 billion
Percentage Change from 2013: 34.3 percent increase
Discretionary Spending: $8.6 billion
Mandatory Spending: $3.1 billion
Highlights: Obama wants to boost investments in research and development and export promotion in hopes of spurring economic growth.
The president is asking for $1 billion to set up a nationwide network of manufacturing innovation institutes to develop cutting-edge technologies to make U.S. manufacturing firms more competitive.
Obama's budget request also calls for $754 million for the National Institute of Standards and Technology laboratories aimed at making American manufacturers more competitive in the global marketplace. The money is for promoting advances in areas such as cyber security, manufacturing, communications and disaster resilience.
The president also wants $113 million to create the Investing in Manufacturing Communities Partnership. The money would go to projects such as industrial parks and industry academic centers to promote long-term economic growth.
Obama's budget would also boost funding for the National Oceanic and Atmospheric Administration, including its weather satellite programs.
The president is seeking $21 million for the Advanced Manufacturing Technology Consortia program, which is a public-private partnership aimed at finding answers to manufacturing challenges that U.S. businesses face.
Obama also is requesting $520 million for the International Trade Administration.
Total Spending: $682.9 billion
Percentage Change from 2013: 0.5 percent increase
Discretionary Spending: $615.3 billion
Mandatory Spending: $67.6 billion
Highlights: The Pentagon is proposing savings mainly through ending or shrinking certain weapons programs, shaving health care benefits and reducing military construction. It also would slow the pace of military pay raises. Spending would otherwise be largely the same in all major categories as in 2013.
The budget proposal calls on Congress to approve a round of domestic military base closings in 2015, which would cost an estimated $2.4 billion in the short run but save an unspecified amount over the long term.
Although the U.S. is winding down its role in Afghanistan, the Pentagon faces enormous costs of pulling out its troops. The 2014 budget includes a "placeholder" figure of $88.5 billion for war costs, although that number is expected to be revised down slightly once the White House makes more decisions about the pace of 2014 troop withdrawals. The budget assumes that the U.S. will have 34,000 troops in Afghanistan at the end of the budget year in September, down from the current 63,000.
Total Spending: $56.7 billion
Percentage Change from 2013: 10.8 percent decrease
Discretionary Spending: $71.2 billion
Mandatory Spending: $0
Highlights: Obama's proposed education budget calls for expanded programs for young people before they reach kindergarten and offered Congress two options to consider: a $750 million preschool program for 4-year-old students from four-member families earning $47,100 or less; or a more expansive $2 billion option that would provide universal access to pre-school programs, with incentives for states to offer programs for all families. The proposal requires that up to 5 percent of those funds be used to measure student achievement and collect data.
The president's preschool plan would be paid for by a higher tax on tobacco, which the administration said would raise $78 billion over a decade by almost doubling the federal tax on cigarettes to $1.95 per pack.
During its first years, federal tax dollars would cover 90 percent of the costs and states would pick up the balance for these preschool programs, said Carmel Martin, the Education Department's policy chief. However, the federal share would shrink to 25 percent in coming years and states would be left to pick up 75 percent of the costs.
The budget also sets aside $11.8 billion to help local districts keep teachers on staff while the economy returns to pre-recession levels.
Obama's budget also would move student loan interest rates away from Congress' control and peg them to market rates. That shift is a nod to concerns that student borrowing is set in a vacuum by politicians and not by the economy. Interest rates on new Stafford student loans were set to double, from 3.4 percent to 6.8 percent, on July 1. Consumer advocates worried that could cost students who take new student loans at the maximum levels some $5,000 over the life of the loan. Obama's budget would let new borrowers dodge that rate hike for now, but could open students to higher rates if the markets change in the future.
Obama's budget also includes $1 billion in funds for a college affordability initiative, which would give money to states in exchange for keeping costs down and investing in improving results, similar to the Race to the Top competition the department used to spur innovation in primary and secondary education.
The maximum Pell Grant amount would increase to $5,645 for each student each year and some 112,000 new students would be added to federal work study programs.
While the budget only asks Congress for the $56.7 billion, the Education Department stands to spend closer to $71.2 billion. That difference — $14.5 billion — is the amount the agency collects from student loan interest, fees and other sources, letting the Education Department ask for less than it spends.
Total Spending: $32.5 billion
Percentage Change from 2013: 35.3 percent increase
Discretionary Spending: $28.4 billion
Mandatory Spending: $4.1 billion
Highlights: Obama again would increase spending for two priorities: clean energy and national security. The budget proposal calls for an additional $615 million to increase use of renewable energy such as solar, wind, geothermal and hydropower and spends more than $2.1 billion to modernize the U.S. nuclear weapons stockpile and $5.3 billion to clean up nuclear waste at defense-related sites across the nation, including one in Washington state used to build the atomic bomb.
The budget calls for spending $575 million on cutting-edge vehicle technologies, $282 million to develop new biofuels such as ethanol made from switchgrass or other materials and $200 million for a new Energy Security Trust to expand research into electric cars and biofuels to wean automobiles off gasoline. Obama envisions cars that one day can go coast to coast without using any traditional gasoline. Obama says the trust would use revenues from federal leases on offshore drilling without adding to the deficit.
As he has each year in office, Obama again calls for repealing more than $4 billion per year in tax subsidies to oil, gas and other fossil fuel producers. The budget proposal says the plan eliminates "unwarranted and unnecessary subsidies that impede investment in clean energy sources and undermine efforts to address the threat of climate change."
In a surprise move, the budget calls for a strategic review of the Tennessee Valley Authority, opening the possibility that the federally owned utility could be sold. Although TVA does not receive taxpayer appropriations, the utility's expenditure of borrowed funds does count in the federal deficit. In a statement, the administration said the utility's anticipated capital needs, which include expansion of nuclear power, are likely to quickly exceed the agency's $30 billion statutory cap.
The budget slashes funding for a project to turn weapons-grade plutonium into fuels for nuclear reactors and questions the viability of the nearly $8 billion effort. The budget seeks $503 million for the mixed-oxide fuel plant being built at South Carolina's Savannah River nuclear site — $200 million less than current funding. The plant is part of an international nonproliferation effort, with the United States and Russia committed to disposing of at least 34 metric tons each of weapons-grade plutonium to be turned into commercial nuclear reactor fuel.
The so-called MOX project has undergone years of delays, and the Government Accountability Office says the plant is $3 billion over budget. In its budget request, the administration says it supports the theory behind the project but says it "may be unaffordable."
The budget also includes $386 million — a $76 million increase over current spending — for the Advanced Research Projects Agency-Energy (ARPA-E), a program that seeks to research on new ways to generate, store and use energy.
Agency: Environmental Protection Agency
Total Spending: $8 billion
Percentage Change from 2013: 9 percent decrease
Discretionary Spending: $8.1 billion
Mandatory Spending: $0
Highlights: Despite President Barack Obama's tough talk on addressing global warming, his budget for the agency with the biggest role in reducing the heat-trapping pollution contains few bold moves. In fact, Obama's fiscal 2014 budget request for the Environmental Protection Agency presents his fourth consecutive cut for the agency, a 9 percent reduction from 2013 levels.
On climate, the EPA will continue on the course it was on during Obama's first term: pushing for greater fuel savings so the nation uses less oil from cars, trucks and other mobile sources and supporting voluntary programs to boost energy efficiency. There's no mention of whether the EPA will control the gases blamed for global warming from coal-fired power plants, as it probably will be compelled to do by law. But the budget envisions a role for EPA in preparing communities for the unavoidable impacts of future climate change, by helping them prepare for extreme weather events linked to global warming.
The cleanup program for the nation's most hazardous waste sites gets a $67 million increase in the budget request, but that is compared to the deep cuts put in place by automatic spending cuts. It means that no new cleanups will start. But there will be enough money to deal with emergency releases from contaminated sites.
States will also see less federal money to help improve infrastructure and treatment plants for drinking water, meaning the focus will be on small, underserved communities.
The budget also suggests that the agency will beef up its regulation of pesticides, by developing methods to better detect and enforce limits for residues on food and by applying health-based standards to the registration of new pesticides.
Total Spending: $12 billion
Percentage Change from 2013: 2.7 percent decrease
Discretionary Spending: $11.7 billion
Mandatory Spending: $297 million
Highlights: Obama's budget plan cuts overall spending for Interior the fiscal year that begins Oct. 1, and Interior Secretary Ken Salazar decried mandatory budget cuts for the current year that he said have left the department "in a ditch."
Budget cuts already imposed have forced the closing of visitor centers at national parks across the country and have forced furloughs for thousands of employees, including U.S. park police, Salazar said. Hundreds of park police officers face 14 unpaid furlough days between now and Sept. 30, Salazar said, and the department has canceled a training class for recruits. In addition, as many as 7,000 young people will not be hired by parks this summer as planned.
Obama's budget proposal "takes us out of the ditch," Salazar told reporters Wednesday, but would cut overall spending.
The budget requests $600 million for land and water conservation and for the first time would permanently authorize annual mandatory spending for the Land and Water Conservation Fund, a joint program with Agriculture that protects parks, wildlife refuges, forests, rivers, trails, battlefields, historic and cultural sites.
The budget again floats new fees for the oil and gas industry to pay for the processing of permits and would impose fees on leased parcels where no production is occurring. Officials say the fees would save an estimated $250 million a year and expedite drilling on public lands, but the ideas have made little headway in Congress.
The budget includes $240 million for the agency that oversees offshore drilling, a 10 percent increase over current spending. Officials say the increase would enable the Bureau of Safety and Environmental Enforcement to improve its response to oil spills, allow for more safety inspections and improve investigations and enforcement.
The budget also boost funding for the America's Great Outdoors initiative, an Obama program intended to promote outdoor recreation in national parks, wildlife refuges and other public lands.
In a move sure to irk coal-state lawmakers, Obama again calls for changing a fee system designed to clean up abandoned coal mines. States with no abandoned mines would not receive payments.
Agency: Health and Human Services
Total Spending: $949.9 billion
Percentage Change from 2013: 5.4 percent increase
Discretionary Spending: $78.3 billion
Mandatory Spending: $871.6 billion
Highlights: The rollout of Obama's health care law next year drives spending increases in the Health and Human Services budget, but the president is also proposing to trim Medicare costs as he tries to draw Republicans into negotiations to reduce government red ink.
Ninety percent of HHS spending is "mandatory," meaning it goes for benefit programs like Medicare and Medicaid that aren't subject to routine annual budgeting in Congress.
Under Obama's health care law, Medicaid spending will rise significantly next year as the program is opened up to low-income people who aren't currently eligible, mainly adults with no children living at home. Middle-class people who don't get coverage on the jobs will be eligible for tax credits to help them buy private health insurance, but those costs aren't reflected in the HHS budget under government accounting practices.
Obama is proposing to cut Medicare spending about $400 billion over 10 years from currently projected levels. In percentage terms, that translates into a single-digit trim for the giant health program that serves seniors and disabled people. The biggest chunk, more than $130 billion, would come from drug company rebates, including a new proposal that speeds up closing Medicare's prescription drug coverage gap.
Upper middle-class and well-to-do seniors would face higher monthly premiums for outpatient care and prescriptions, an idea that Obama has floated before and that also has Republican support. Newly joining beneficiaries would pay somewhat more for home health care and for outpatient services.
The budget generally holds the line on funding for medical research, with about $31 billion for the National Institutes of Health.
The Centers for Disease Control and Prevention gets a boost from a new $40 million program to more quickly track emerging infections and determine if bugs are resistant to antibiotics. And there's a new $130 million initiative to expand mental health treatment and prevention, focusing on young people.
The 8 Best Natural Gas Stocks. Find Out How to Invest.