THE EVENT: President Obama delivered a $3.6 trillion budget to
Congress that calls for expanded government activism, tax increases
on affluent families and businesses, and spending cuts targeted at
those he says profited from "an era of profound
irresponsibility."
The plan projects a federal deficit of $1.75 trillion for 2009,
or 12.3% of the gross domestic product, a level not seen since
1942.
The budget represents a reordering of the federal government to
provide national health care, shift the economy away from oil and
gas, and boost the commitment to education.
Troops would leave Iraq as another war ramps up in
Afghanistan.
To fund it all, families earning more than $250,000 and some
businesses will pay steeply. Obama implored Americans to accept
profound sacrifices.
HIGHLIGHTS:
-Community Service: Expands Corporation for National and
Community Service. AmeriCorps, the agency program that partners
with nonprofits to recruit young Americans for community service,
would expand to 250,000 slots from 75,000.
-Health Insurance: $630 billion for national health-insurance
program. Managed-care companies would lose subsidies for offering
Medicare plans.
-Banking: sets aside additional $250 billion to complete effort
to rescue financial markets and stabilize banking sector, on top of
$700 billion already allocated by Congress. Reserve would leverage
purchase of toxic assets weighing down the banking sector's books,
$750 billion in asset purchases overall. That could mean a doubling
of the original bailout in the end. The administration also
acknowledged the government is likely to get only 66 cents on the
dollar for the hundreds of billions it has invested in bailing out
the U.S. banking system, a figure more pessimistic than some
previous cost projections for the financial-rescue plan.
-Education: discontinue fees paid to banks that provide loans to
students, effectively ending private sector student lending.
Proposes large increases in education funding, including indexing
Pell Grants for higher education to inflation.
-Energy: $26.3 billion for Department of Energy's 2010 budget to
fund transition to low-carbon energy economy.
-Greenhouse Gases: cap emissions of greenhouse gases, forcing
polluters to purchase permits for emissions that slowly would be
brought down to 14% below 2005 levels by 2020 and 83% below 2005
levels by 2050. The sale of those permits, beginning in 2012, would
reap $646 billion through 2019. Of that, $525.7 billion would be
devoted to extending Obama's signature "Making Work Pay" $800 tax
credit for working couples. Another $120 billion would go to clean
energy technology.
-Oil and Gas: $13 billion over 10 years in new charges on oil
and gas companies from repeal of a tax deduction for domestic
production. Proposes new excise tax on oil and gas production in
the Gulf of Mexico.
-High-Speed Rail: proposes spending $5 billion over five years
on program that provides grants to states to invest in "high-speed"
rail, on top of the $8 billion over two years for high-speed rail
in the economic-stimulus package.
-Agriculture: would cut federal payments to the nation's largest
and wealthiest farmers, reduce subsidies for crop insurance, and
eliminate credits for cotton storage. The administration endorsed a
$500,000 commodity program payment limit, saying that will help
ensure payments "are made to those who most need them."
-Trade: includes funds to reform trade-adjustment assistance,
after the program to help workers displaced by trade was expanded
in the recently passed stimulus package.
-IMF: request for $8 billion increase in the U.S. quota to the
International Monetary Fund. Projects full funding of all 2010
scheduled payments to multilateral development banks, as well as
paying part of outstanding arrears "to reinforce the U.S.
commitment to play a leadership role in these institutions."
-FBI: Federal Bureau of Investigation would get funds to boost
the ranks of agents investigating mortgage fraud.
-FDA: Food and Drug Administration would receive more than $1
billion to improve inspections and domestic surveillance of food
facilities.
-Pensions and Savings: requires employers who don't offer a
pension program to implement a direct-deposit retirement savings
system. The plan would be implemented in the form of an Individual
Retirement Account, similar to 401(k)-type plans.
-Social Security fraud: proposes $759 billion for efforts to
find Social Security overpayments; the White House estimates that
the federal government could save $12.1 billion over five years by
making sure that only eligible people receive Social Security
payments. The budget documents are largely silent on broader Social
Security reforms.
-SEC and CFTC: The SEC would stand to receive a 13% increase in
funding from 2008 levels, and the Commodity Futures Trading
Commission would see a 44% increase relative to its 2008 funding
level. Part of the latter's increase will go toward helping
implement new oversight powers for energy, over-the-counter
derivatives and retail foreign exchange trading.
-Commerce Department: seeks $4.5 billion increase over the $9.3
billion Congress is expected to appropriate for the agency this
year. Much of that additional money, $4 billion, is designated for
the 2010 census.
MARKET REACTION: After initially hovering at a 90-point gain,
the Dow Jones Industrial Average turned lower in the late morning.
At about 1:15 p.m., the DJIA was off 10 points at 7261, the S&P
500 fell 2.2 points to 762.7, and the Nasdaq Composite declined 11
points to 1415.
Shares of student lenders fell, with SLM Corp. (SLM) at one
point dropping 41% to its lowest point since October and Nelnet
Inc. (NNI) hitting a record low.
Managed-care companies extended their declines as the
administration's proposed budget would put in place vast reductions
in payments to private insurers through the Medicare Advantage
program and would implement a bidding process for insurers. Humana
Inc. (HUM) was the hardest hit, recently dropping 14%.
For more coverage, please see:
=Obama Unveils Budget With Ambitious Policy Prescriptions
=Obama Budget Incorporates Optimistic Economic Forecasts
=White House: Deficit To Hit $1.75T In FY09, $1.17T In FY10
=Obama Fiscal 2010 Budget Overview By Agency
(Compiled by Lisa Reynolds, Dow Jones Newswires; 201-938-5138;
lisa.reynolds@dowjones.com)
