Lowering Discretionary Spending

President Obama has led the way on forcing government to live within its means through a balanced approach that protects key priorities and ensures that everyone pays their fair share. In August, President Obama signed into law a bipartisan agreement that kept our nation from defaulting and achieved significant deficit reduction, including a down payment on reform of about $1 trillion, by reducing discretionary spending to its lowest level as a share of the economy since Dwight D. Eisenhower was President while protecting critical investments critical to our long-term competitiveness. And under this agreement, Congress must pass another $1.5 trillion in deficit reduction, or trigger massive cuts to domestic and defense spending, providing an incentive for both sides to come together. The agreement is consistent with the President’s values of achieving meaningful deficit reduction in a common-sense balanced manner, in which low-income and middle-class families do not bear the entire burden, in which the most fortunate Americans pay their fair share, and in which cuts are spread across both the security and non-security sides of government.

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The Budget Control Act locks in historic spending discipline, balanced between domestic and Pentagon discretionary spending. Highlights include:

Brings domestic discretionary spending to its lowest level since Eisenhower: As part of the down payment on deficit reduction the President signed this August, domestic discretionary spending will be brought to its lowest level as a share of the economy since Dwight D. Eisenhower was President. At the same time, the President has insisted that these cuts include both domestic and defense spending, and has made clear that they cannot threaten our long-term competitiveness or our commitments to the most vulnerable – for example, by ensuring that historic expansions of Pell Grants are maintained.

Saves more than $900 billion over 10 years by imposing long-term spending restraint:  The Budget Control Act mandates historic levels of spending cuts—nearly $1 trillion—done in a way that will not harm the economic recovery. The cuts are balanced between domestic and Pentagon spending, and protect critical initiatives like aid for college students;

Protects core investments from deep and economically damaging cuts: President Obama is adamant that in order to fundamentally rebuild our economy, we have to out-innovate, out-educate and out-build the rest of the world, tapping the creativity and imagination of our people. We have to take responsibility for our deficit, but we need to continue investing in what makes America stronger and cutting what doesn’t. The Budget Control Act allows us to continue investing in innovation, infrastructure and education. 

Saves $350 billion from the base defense budget: For the first time since the 1990s, defense spending will decline. The Budget Control Act puts us on track to cut $350 billion from the defense budget over 10 years. These reductions will be implemented based on the outcome of a review of our missions, roles, and capabilities that will reflect the President’s commitment to protecting our national security.

Protects the President’s historic investment in Pell Grants: Since taking office, the President has increased the maximum Pell award by $819 to a maximum award $5,550 per year, helping over 9 million students pay for college tuition bills. The deal provides specific protection in the discretionary budget to ensure that the there will be sufficient funding for the President’s commitment to making college more affordable for all Americans.

Protects low-income and middle-class families from shouldering the sole burden of deficit reduction: The President stood firmly against proposals that would have placed the sole burden of deficit reduction on lower-income and middle-class families. This includes not only proposals in the House Republican Budget that would have undermined the core commitments of Medicare to our seniors and forced tens of millions of low-income Americans to go without health insurance, but also enforcement mechanisms that would have forced automatic cuts to low-income programs. The enforcement mechanism in the deal exempts Social Security, Medicaid, Medicare benefits, unemployment insurance, programs for low-income families, and civilian and military retirement.

And, the President has proposed to go beyond this down payment and is proposing important reforms to mandatory programs saving hundreds of billions of dollars. He has called on the Joint Committee on Deficit Reduction to enact these reforms. Highlights include:

Strengthens Medicare and Medicaid: President Obama is recommending a series of reforms that build on the historic savings in the Affordable Care Act. Overall, these proposals will save $248 billion in Medicare over 10 years and $73 billion in Medicaid and other health programs—and more than a trillion dollars in deficit reduction in the second decade. They accomplish this in a way that does not shift significant risks onto the individuals these programs serve, slash benefits, or undermine the fundamental compact they represent to our Nation’s seniors, people with disabilities, and low-income families. Even though these reforms can and will save money, they also will strengthen these vital programs and ensure that they are robust and healthy to serve Americans for years to come.

Reforms to other mandatory programs throughout the budget:  The President is proposing $257 billion in cuts and reforms to a wide range of mandatory programs from Federal retirement to agricultural subsidies, reform of the Pension Benefit Guaranty Corporation, new program integrity initiatives, and getting rid of unneeded Federal real estate property to reduce the deficit.