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Financial News Network
February 15, 2011 AT 7:34 AM
"President Barack Obama released Monday his plans to drastically cut federal spending with a proposed $3.73 trillion budget for fiscal year 2012.The proposal will reduce the national deficit by more than $1 trillion over a 10 year period, 75% of which will be accounted for by spending cuts, tax increases or doing away with existing tax breaks. The Obama administration estimates that reducing or cutting 200 federal programs will save $33 billion in 2012 alone.Obama said, "My budget makes investments that can help American win this competition and transform our economy, and it does so fully aware of the very difficult fiscal situation we face."Obama also said that the programs that would be cut under the new budget include "many whose mission I care deeply about, but meeting our fiscal targets while investing in our future demands no less."The president is calling for a 5 year non-security discretionary spending freeze and a 2 year freeze of federal government employee salaries.Despite the reductions, Obama's budget still falls short of the $4 trillion in savings recommended by a White House deficit commission because it offers little change to Medicare, Medicaid and Social Security programs. It also fails to measure up to the $62 billion Republican leaders are pushing to slash in the remaining seven months of fiscal 2011 with more cuts in fiscal 2012. Republican lawmakers are also criticizing Obama for failing to outline plans to reduce entitlement spending.However, the budget acknowledged that cuts to discretionary spending are only the beginning to remedying the country's fiscal problems, reading, ""But non-security, discretionary spending represents approximately 12% of all spending. The solution to our long-term fiscal problems cannot rest on this alone.""Obama is looking to create long-term growth through investments on innovative technology, research and development and education. The budget will create 100,000 teaching positions in science, math, technology and engineering over the next 10 years.Under the proposed budget, the national deficit would decline from its projected 10.9% of GDP in fiscal 2011 to 2.9% by fiscal 2018. Economists, for the most part, agree that a deficit lower than 3% of GDP is sustainable."