How a spending freeze will help deficit

Hundred dollar bills chilling in snow


Bill Radke: President Obama is readying a plan to freeze spending on some domestic programs. Polls show many Americans want more fiscal responsibility. The president will tell us in his State of the Union address tomorrow discretionary spending on some programs will be frozen for three years and then rise only with inflation. Marketplace's Mitchell Hartman joins us live. Good morning.

Mitchell Hartman: Good morning, Bill.

Radke: So I understand there are some big exceptions to the spending freeze.

Hartman: That's right. First of all, everything related to security -- so that's defense, homeland security, veterans and foreign affairs. Also the big entitlement programs -- that's Medicare, Medicaid, Social Security. So what's subject to freeze or cuts is discretionary spending. We're talking about farm subsidies, education, energy, national parks, environmental protection, plus all of those congressional earmarks. All told, it saves about $250 billion -- that is roughly 3 percent of the $9 trillion in deficits we're expected to run up in the next decade.

Radke: So how much of a difference will this make?

Hartman: Well it may seem like a small slice of a big budget, but Jan Randolph of IHS Global Insight says it's the what international lenders are looking for.

Jan Randolph: There's so many governments in the bond markets raising so much money, and it's incumbent on virtually every single Western government to bring in plans to restore public finances, bring them back to balance over the next few years, once recovery's in the bag.

You know, and keep in mind, the administration got some proposed tax credits for child care and job creation, student loan relief. But they're all in this year's budget, and this freeze starts next year.

Radke: Right. Marketplace's Mitchell Hartman. Thanks for that.

Hartman: You're welcome.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.


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