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Obama unveils 2010 budget

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President Barack Obama's 2010 budget leaves a deep deficit, but also socks away $634 billion for health care reforms.

It also boosts funding for national forests operations and for American Indian health care.

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The $3.55 trillion budget blueprint Obama sent to Congress on Thursday leaves a $1.75 trillion deficit, but also a return to pay-go -- a policy where new spending must be accompanied by spending cuts.

"The president has been clear, both during the campaign and since he's been in office, that this budget just can't be business as usual," Rob Nabors, deputy director of the Office of Management and Budget, said Thursday in a telephone conference call with reporters.

"We need to make tough decisions, we need to go line by line, and we need to evaluate the effectiveness of programs -- not based on politics but based on whether these programs work or do not work," Nabors said during the half-hour call.

The blueprint, "A New Era of Responsibility," released Thursday only sets broad budget parameters and some budget totals. Nabors said the more detailed line-by-line budget will be released in April.

The promised budget reform is one of three legs of the stool used to frame the blueprint, he said.

"This budget document, which is created at a very high level, begins that conversation," Nabors said of budget reform.

Health care reform is the first pillar for the budget in seeking long-term stability, he said. "We're talking about a significant down payment on the single biggest issue that affects the fiscal future of this country."

Obama would set aside a reserve fund of more than $630 billion over 10 years dedicated to financing health care reforms. He would raise the funds by allowing tax breaks for the wealthy to expire in 2010 and by finding savings and efficiencies in the current system.

While past administrations have gone nowhere with major health care reforms, Nabors said it is Obama's intention to have major health care reform from the current session of Congress, which ends Oct. 1.

Health care now consumers between 2 and 4 percent of gross domestic product, he said. By 2050, it will consume 20 percent of GDP if nothing is done.

"This budget begins the process of taking that action now," Nabors said. "We've highlighted some very specific places where we think reductions within the current health care system can be made, and then filtered back into improve health care. That is the start of a conversation we want with Congress this year."

Nabors said that conversation will also include health care benefits. "This can't just be a conversation about saving dollars, it has to be a conversation about improving the health care of the American people."

The second major pillar of future budget stability is in energy programs, he said, focusing around cap and trade.

"Cap and trade is an effective mechanism by which we can start to reduce greenhouse emissions," Nabors said. "As a result, we expect revenue to come into the government."

With that revenue, the Obama administration is proposing to use some to pay for the Making Work Pay tax cut, he said. It would also fund investments in energy and renewable infrastructure, and some of the revenue would fund programs that help people affected by high energy costs.

The Making Work Pay tax credit is part of the $787 billion economic stimulus package which provides a refundable tax credit of up to $400 per worker, or $800 per couple, that will affect about 95 percent of American workers. The budget proposal would make the credit permanent.

Cap and trade is a developing process where polluting companies pay for carbon credits at auction from under-producing polluters but with a cap on the overall carbon emissions allowable. But if the revenues don't develop, then the programs they would fund would be slashed.

"We've learned lessons from previous administrations," Nabors said. "We think that Making Work Pay is incredibly important, but tax cuts without offsets are not sustainable. It just shows the commitment of the president both to fiscal discipline, the cap and trade system and to Making Work Pay, that we're specifically tying the two together."

The need for cap-and-trade revenues would also apply to a $150 billion investment over 10 years for clean energy research, he said.

The Obama administration will return to pay-go for new budget items, he said, admitting that the 2009 budget and the economic stimulus package do not apply.

"If you're going to spend an extra dollar, you need to find savings somewhere from within the budget baseline to offset that extra dollar," Nobles said. "We are committed to pay-go -- statutory pay-go -- as it was successful in the '90s primarily because there was a general agreement among all parties ... as to the direction and types of programs that were priorities for the country."

The budget blueprint lays out what the Obama administration believes are the priorities for the country, Nobles said. "We would ask Congress to use pay-go to enforce the numbers and the direction we are going in."

Some budget highlights include:

-- Provides $50 million increase (plus inflation) for national forests operations to protect natural resources and maintain facilities.

-- Fully funds the 10-year average fire suppression costs including $282 million discretionary funding contingent reserve when a $1.1 billion appropriated 10-year average is exhausted for fighting fires in the nation's forests.

-- Strengthens the Indian health system with sustained investments in health care services for American Indians to address persistent health disparities and foster healthy Indian communities.

-- Invests $330 million to increase the number of doctors, nurses and dentists practicing in areas of the country experiencing shortages of health professionals.

-- Invests more than $1 billion for Food and Drug Administration food safety efforts to increase and improve inspections, domestic surveillance, laboratory capacity and domestic response to prevent and control foodborne illness.

-- Includes more than $100 million in increased funding to the U.S. Bureau of Indian Affairs for law enforcement and education.

-- Provides $26 billion to the U.S. Department of Agriculture. While eliminating direct subsidy payments to farmers with more than $500,000 in annual sales revenues and capping other subsidies, the budget would also develop rural broadband services, provide $250 million in grants and loans to increase home-grown renewable fuels and provides a $1 billion increase in child nutrition programs. Eliminates the Resource Conservation and Development program, saying RC&D councils should be able to secure funding without federal assistance.

-- In higher education, provides a new five-year, $2.5 billion Access and Completion Incentive Fund to support innovative state efforts to help low-income students succeed and complete their college education.

-- Increases funding for the Department of Veterans Affairs by $25 billion above the baseline over the next five years, dramatically increasing funding for veterans health care.

-- Enhances outreach and services related to mental health care and cognitive injuries, including post-traumatic stress disorder and traumatic brain injury, with a focus on access for veterans in rural areas.

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