[Congressional Record (Bound Edition), Volume 158 (2012), Part 1]
[Senate]
[Pages 1457-1460]
[From the U.S. Government Publishing Office, www.gpo.gov]




   BUDGET OF THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2013--PM 40

  The PRESIDING OFFICER laid before the Senate the following message 
from the President of the United States, together with an accompanying 
report; which was referred jointly, pursuant to the order of January 
30, 1975 as modified by the order of April 11, 1986; to the Committees 
on Appropriations; and the Budget:

To the Congress of the United States:
  America was built on the idea that anyone who is willing to work hard 
and play by the rules, can make it if they try--no matter where they 
started out. By giving every American a fair shot, asking everyone to 
do their fair share, and ensuring that everyone played by the same 
rules, we built the great American middle class and made our country a 
model for the world.
  Today, America is still home to the world's best universities, most 
productive workers, and most innovative companies. But for many 
Americans, the basic bargain at the heart of the American Dream has 
eroded.
  Long before this recession hit, there was a widespread feeling that 
hard work had stopped paying off; that fewer and fewer of those who 
contributed to the success of our economy actually benefited from that 
success. Those at the very top grew wealthier while everyone else 
struggled with paychecks that did not keep up with the rising cost of 
everything from college tuition to groceries. And as a result, too many 
families found themselves taking on more and more debt just to keep 
up--often papered over by mounting credit card bills and home equity 
loans.
  Then, in the middle of 2008, the house of cards collapsed. Too many 
mortgages had been sold to people who could not afford--or even 
understand--them. Banks had packaged too many risky loans into 
securities and then sold them to investors who were misled or 
misinformed about the risks involved. Huge bets had been made and huge 
bonuses had been paid out with other people's money. And the regulators 
who were supposed to prevent this crisis either looked the other way or 
did not have the authority to act.
  In the end, this growing debt and irresponsibility helped trigger the 
worst economic crisis since the Great Depression. Combined with new tax 
cuts and new mandatory programs that had never been paid for, it threw 
our country into a deep fiscal hole. And millions of hardworking 
Americans lost their jobs, their homes, and their basic economic 
security.
  Today, we are seeing signs that our economy is on the mend. But we 
are not out of the woods yet. Instead, we are facing a make-or-break 
moment for the middle class, and for all those who are fighting to get 
there. What is at stake is whether or not this will be a country where 
working people can earn enough to raise a family, build modest savings, 
own a home, and secure their retirement. This is the defining issue of 
our time.
  This Budget reflects my deep belief that we must rise to meet this 
moment--both for our economy and for the millions of Americans who have 
worked so hard to get ahead.
  We built this Budget around the idea that our country has always done 
best when everyone gets a fair shot, everyone does their fair share, 
and everyone plays by the same rules. It rejects the ``you'reon your 
own'' economics that have led to a widening gap between the richest and 
poorest Americans that undermines both our belief in equal opportunity 
and the engine of our economic growth. When the middle class is 
shrinking, and families can no longer afford to buy the goods and 
services that businesses are selling, it drags down our entire economy. 
And countries with less inequality tend to have stronger and steadier 
economic growth over the long run.
  The way to rebuild our economy and strengthen the middle class is to 
make sure that everyone in America gets a fair shot at success. Instead 
of lowering our standards and our sights, we need to win a race to the 
top for good jobs that pay well and offer security for the middle 
class. To succeed and thrive in the global, high-tech economy, we need 
America to be a place with the highest-skilled, highest-educated 
workers; the most advanced transportation and communication networks; 
and the strongest commitment to research and technology in the world. 
This Budget makes investments that can help America win this race, 
create good jobs, and lead in the world economy.
  And it does so with the understanding that we need an economy that is 
no longer burdened by years of debt and in which everyone shoulders 
their fair share to put our fiscal house in order. When I took office 3 
years ago, my Administration was left an annual deficit of $1.3 
trillion, or 9.2 percent of GDP, and a projected 10-year deficit of 
more than $8 trillion. These deficits were the result of a previous 8 
years of undertaking initiatives, but not paying for them--especially 
two large tax cuts and a new Medicare prescription drug benefit--as 
well as the financial crisis and recession that made the fiscal 
situation worse as revenue decreased and automatic Government outlays 
increased to counter the downturn.
  We have taken many steps to re-establish fiscal responsibility, from 
instituting a statutory pay-as-you-go rule for spending to going 
through the budget line by line looking for outdated, ineffective, or 
duplicative programs to cut or reform. Importantly, we enacted the 
Affordable Care Act, which will not only provide Americans with more 
affordable choices and freedom from insurance company abuses, but will 
also reduce our budget deficits by more than $1 trillion over the next 
two decades.
  As economic growth was beginning to take hold last year, I took 
further steps to put our Nation on a fiscally sustainable path that 
would strengthen the foundation of the economy for years to come. In 
April of 2011, I put forward my Framework for Shared Prosperity and 
Shared Fiscal Responsibility that built on the 2012 Budget to identify 
$4 trillion in deficit reduction. During negotiations over extending 
the debt ceiling in the summer, I presented to congressional 
Republicans another balanced plan to achieve $4 trillion in deficit 
reduction. Finally, in September, I sent my Plan for Economic Growth 
and Deficit Reduction to the Joint Select Committee on Deficit 
Reduction, which detailed a way to achieve $3 trillion in deficit 
reduction on top of the $1 trillion already achieved in the Budget 
Control Act of 2011 that I signed into law the previous month.
  I also made sure that this plan covered the cost of the American Jobs 
Act--a set of bipartisan, commonsense proposals designed to put more 
people back to work, put more money in the

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pockets of the middle class, and do so without adding a dime to the 
deficit at a time when it was clear that global events were slowing the 
economic recovery and our ability to create more jobs. Unfortunately, 
Republicans in Congress blocked both our deficit reduction measures and 
almost every part of the American Jobs Act for the simple reason that 
they were unwilling to ask the wealthiest Americans to pay their fair 
share.
  In the year ahead, I will continue to pursue policies that will shore 
up our economy and our fiscal situation. Together with the deficit 
reduction I signed into law this past year, this Budget will cut the 
deficit by $4 trillion over the next decade. This will put the country 
on a course to a level of deficits below 3 percent of GDP by the end of 
the decade, and will also allow us to stabilize the Federal debt 
relative to the size of the economy. To get there, this Budget contains 
a number of steps to put us on a fiscally sustainable path.
  First, this Budget implements the tight discretionary spending caps 
that I signed into law in the Budget Control Act of 2011. These caps 
will generate approximately $1 trillion in deficit reduction over the 
next decade. Building on reductions we already have made, this will 
result in a cut in discretionary spending of $42 billion since 2010 
when higher levels of Federal spending were essential to provide a 
jumpstart to the economy. Meeting the spending targets in this Budget 
meant some very difficult choices: reforming, consolidating, or 
freezing programs where we could; cutting programs that were not 
effective or essential and even some that were, but are now 
unaffordable; and precisely targeting our investments. Every department 
will feel the impact of these reductions as they cut programs or 
tighten their belts to free up more resources for areas critical to 
economic growth. And throughout the entire Government, we will continue 
our efforts to make programs and services work better and cost less: 
using competition and high standards to get the most from the grants we 
award; getting rid of excess Federal real estate; and saving billions 
of dollars by cutting overhead and administrative costs.
  Second, this Budget begins the process of implementing my new defense 
strategy that reconfigures our force to meet the challenges of the 
coming decade. Over the past 3 years, we have made historic investments 
in our troops and their capabilities, military families, and veterans. 
After a decade of war, we are at an inflection point: American troops 
have left Iraq; we are undergoing a transition in Afghanistan so 
Afghans can assume more responsibility; and we have debilitated al 
Qaeda's leadership, putting that terrorist network on the path to 
defeat. At the same time, we have to renew our economic strength here 
at home, which is the foundation of our strength in the world, and that 
includes putting our fiscal house in order. To ensure that our defense 
budget is driven by a clear strategy that reflects our national 
interests, I directed the Secretary of Defense and military leadership 
to undertake a comprehensive strategic review.
  I presented the results of the review, reflecting my guidance and the 
full support of our Nation's military leadership, at the Pentagon on 
January 5. There are several key elements to this new strategy. To 
sustain a global reach, we will strengthen our presence in the Asia 
Pacific region and continue vigilance in the Middle East. We will 
invest in critical partnerships and alliances, including NATO, which 
has demonstrated time and again--most recently in Libya--that it is a 
force multiplier. Looking past Iraq and Afghanistan to future threats, 
the military no longer will be sized for large-scale, prolonged 
stability operations. The Department of Defense will focus 
modernization on emerging threats and sustaining efforts to get rid of 
outdated Cold War-era systems so that we can invest in the capabilities 
we need for the future, including intelligence, surveillance and 
reconnaissance capabilities. My Administration will continue to enhance 
capabilities related to counterterrorism and countering weapons of mass 
destruction, and we will also maintain the ability to operate in 
environments where adversaries try to deny us access. And, we will keep 
faith with those who serve by giving priority to our wounded warriors, 
servicemembers' mental health, and the well-being of military families.
  Adapting our forces to this new strategy will entail investing in 
high-priority programs, such as unmanned surveillance aircraft and 
upgraded tactical vehicles. It will mean terminating unnecessary and 
lower-priority programs such as the C-27 airlift aircraft and a new 
weather satellite and maintaining programs such as the Joint Strike 
Fighter at a reduced level. All told, reductions in the growth of 
defense spending will save $487 billion over the next 10 years. In 
addition, the end of ourmilitary activities in Iraq and the wind-down 
of operations in Afghanistan will mean that the country will spend 24 
percent less on overseas contingency operations (OCO) this year than it 
did last year, saving $30 billion. I also am proposing a multi-year cap 
on OCO spending so that we fully realize the dividends of this change 
in policy.
  Third, I believe that in our country, everyone must shoulder their 
fair share--especially those who have benefited the most from our 
economy. In the United States of America, a teacher, a nurse, or a 
construction worker who earns $50,000 a year should not pay taxes at a 
higher rate than somebody making $50 million. That is wrong. It is 
wrong for Warren Buffett's secretary to pay a higher tax rate than 
Warren Buffett. This is not about class warfare; this is about the 
Nation's welfare. This is about making fair choices that benefit not 
just the people who have done fantastically well over the last few 
decades, but that also benefit the middle class, those fighting to get 
into the middle class, and the economy as a whole.
  In the Budget, I reiterate my opposition to permanently extending the 
Bush tax cuts for families making more than $250,000 a year and my 
opposition to a more generous estate tax than we had in 2009 benefiting 
only the very largest estates. These policies were unfair and 
unaffordable when they were passed, and they remain so today. I will 
push for their expiration in the coming year. I also propose to 
eliminate special tax breaks for oil and gas companies; preferred 
treatment for the purchase of corporate jets; tax rules that give a 
larger percentage deduction to the wealthiest two percent than to 
middle-class families for itemized deductions; and a loophole that 
allows some of the wealthiest money managers in the country to pay only 
15 percent tax on the millions of dollars they earn. And I support tax 
reform that observes the ``Buffett Rule'' that no household making more 
than $1 million annually should pay a smaller share of its income taxes 
than middle-class families pay.
  Fourth, to build on the work we have done to reduce health care costs 
through the Affordable Care Act, I am proposing more than $360 billion 
in reforms to Medicare, Medicaid, and other health programs over 10 
years. The goal of these reforms is to make these critical programs 
more effective and efficient, and help make sure our health care system 
rewards high-quality medicine. What it does not do--and what I will not 
support--are efforts to turn Medicare into a voucher or Medicaid into a 
block grant. Doing so would weaken both programs and break the promise 
that we have made to American seniors, people with disabilities, and 
low-income families--a promise I am committed to keeping.
  Finally, to address other looming, long-term challenges to our fiscal 
health, I have put forward a wide range of mandatory savings. These 
include reductions in agricultural subsidies, changes in Federal 
employee retirement and health benefits, reforms to the unemployment 
insurance system and the Postal Service, and new efforts to provide a 
better return to taxpayers from mineral development. Drawn from the 
plan I presented to the Joint Select Committee on Deficit Reduction, 
these mandatory proposals would save $217 billion over the next decade.

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  Reining in our deficits is not an end in and of itself. It is a 
necessary step to rebuilding a strong foundation so our economy can 
grow and create good jobs. That is our ultimate goal. And as we tighten 
our belts by cutting, consolidating, and reforming programs, we also 
must invest in the areas that will be critical to giving every American 
a fair shot at success and creating an economy that is built to last.
  That starts with taking action now to strengthen our economy and 
boost job creation. We need to finish the work we started last year by 
extending the payroll tax cut and unemployment benefits for the rest of 
this year. We also need to take additional measures to put more people 
back to work. That is why I introduced the American Jobs Act last year 
and why I will continue to put forward many of the ideas it contained, 
as well as additional measures, to put people back to work by 
rebuilding our infrastructure, providing businesses tax incentives to 
invest and hire, and giving States aid to rehire teachers and first 
responders.
  We also know that education and lifelong learning will be critical 
for anyone trying to compete for the jobs of the future. That is why I 
will continue to make education a national mission. What one learns 
will have a big impact on what he or she earns: the unemployment rate 
for Americans with a college degree or more is only about half the 
national average, and the incomes of college graduates are twice as 
high as those without a high school diploma.
  When I took office, I set the goal for America to have the highest 
proportion of college graduates in the world by 2020. To reach that 
goal, we increased the maximum annual Pell Grant by more than $900 to 
help nearly 10 million needy students afford a college education. The 
2013 Budget continues that commitment and provides the necessary 
resources to sustain the maximum award of $5,635. In this Budget, I 
also propose a series of new proposals to help families with the costs 
of college including making permanent the American Opportunity Tax 
Credit, a partially refundable tax credit worth up to $10,000 per 
student over 4 years of college, and rewarding colleges and 
universities that act responsibly in setting tuition, providing the 
best value, and serving needy students well.
  To help our students graduate with the skills they will need for the 
jobs of the future, we are continuing our effort to prepare 100,000 
science and math teachers over the next decade. To improve our 
elementary and secondary schools, we are continuing our commitment to 
the Race to the Top initiative that rewards the most innovative and 
effective ways to raise standards, recruit and retain good teachers, 
and raise student achievement. My Budget invests $850 million in this 
effort, which already has been expanded to cover early learning and 
individual school districts.
  And to prepare our workers for the jobs of tomorrow, we need to turn 
our unemployment system into a re-employment system. That includes 
giving more community colleges the resources they need to become 
community career centers--places that teach skills that businesses are 
looking for right now, from data management to high-tech manufacturing.
  Once our students and workers gain the skills they need for the jobs 
of the future, we also need to make sure those jobs end up in America. 
In today's high-tech, global economy, that means the United States must 
be the best place in the world to take an idea from the drawing board 
to the factory floor to the store shelves. In this Budget, we are 
sustaining our level of investment in non-defense research and 
development (R&D) even as overall spending declines, thereby keeping us 
on track to double R&D funding in the key R&D agencies. We are 
supporting research at the National Institutes of Health that will 
accelerate the translation of new discoveries in biomedical science 
into new therapies and cures, along with initiatives at the Food and 
Drug Administration that will speed the approval of new medicines. We 
make important investments in the science and research needed to tackle 
the most important environmental challenges of our time, and we are 
investing in fields as varied as cyber-security, nano-technology, and 
advanced manufacturing. This Budget also puts an emphasis on the basic 
research that leads to the breakthroughs of tomorrow, which 
increasingly is no longer being conducted by the private sector, as 
well as helping inventors bring their innovations from laboratory to 
market.
  This Budget reflects the importance of safeguarding our environment 
while strengthening our economy. We do not have to choose between 
having clean air and clean water and growing the economy. By conserving 
iconic American landscapes, restoring significant ecosystems from the 
Everglades to the Great Lakes, and achieving measurable improvements in 
water and air quality, we are working with communities to protect the 
natural resources that serve as the engines of their local economies.
  Moreover, this Budget continues my Administration's commitment to 
developing America's diverse, clean sources of energy. The Budget 
eliminates unwarranted tax breaks for oil companies, while extending 
key tax incentives to spur investment in clean energy manufacturing and 
renewable energy production. The Budget also invests in R&D to catalyze 
the next generation of clean energy technologies. These investments 
will help us achieve our goal of doubling the share of electricity from 
clean energy sources by 2035. By promoting American leadership in 
advanced vehicle manufacturing, including funding to encourage greater 
use of natural gas in the transportation sector, the Budget will help 
us reach our goal of reducing oil imports by one-third by 2025 and 
position the United States to become the first country to have one 
million electric vehicles on the road by 2015. We also are working to 
decrease the amount of energy used by commercial and industrial 
buildings by 20 percent to complement our ongoing efforts to improving 
the efficiency of the residential sector. And we will work with the 
private sector, utilities, and States to increase the energy 
productivity of American industries while investing in the innovative 
processes and materials that can dramatically reduce energy use.
  It is also time for government to do its part to help make it easier 
for entrepreneurs, inventors, and workers to grow their businesses and 
thrive in the global economy. I am calling on Congress to immediately 
begin work on corporate tax reform that will close loopholes, lower the 
overall rate, encourage investment here at home, simplify taxes for 
America's small businesses, and not add a dime to the deficit. 
Moreover, to further assist these companies, we need a comprehensive 
reorganization of the parts of the Federal Government that help 
businesses grow and sell their products abroad. If given consolidation 
authority--which Presidents had for most of the 20th century--I will 
propose to consolidate six agencies into one Department, saving money, 
and making it easier for all companies--especially small businesses--
get the help they need to thrive in the world economy.
  Finally, this Budget advances the national security interests of the 
United States, including the security of the American people, the 
prosperity and trade that creates American jobs, and support for 
universal values around the world. It increases funding for the 
diplomatic efforts that strengthen the alliances and partnerships that 
improve international cooperation in meeting shared challenges, open 
new markets to American exports, and promote development. It invests in 
the intelligence and homeland security capabilities to detect, prevent, 
and defend against terrorist attacks against our country.
  As we implement our new defense strategy, my Administration will 
invest in the systems and capabilities we need so that our Armed Forces 
are configured to meet the challenges of the coming decade. We will 
continue to invest in improving global health and food security so that 
we address the root causes of conflict and security threats. And we 
will keep faith with our men and women in uniform, their

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families, and veterans who have served their Nation.
  These proposals will take us a long way towards strengthening the 
middle class and giving families the sense of security they have been 
missing for too long. But in the end, building an economy that works 
for everyone will require all of us to take responsibility. Parents 
will need to take greater responsibility for their children's 
education. Homeowners will have to take more responsibility when it 
comes to buying a house or taking out a loan. Businesses will have to 
take responsibility for doing right by their workers and our country. 
And those of us in public service will need to keep finding ways to 
make government more efficient and more effective.
  Understanding and honoring the obligations we have to ourselves and 
each other is what has made this country great. We look out for each 
other, pull together, and do our part. But Americans also deserve to 
know that their hard work will be rewarded.
  This Budget is a step in the right direction. And I hope it will help 
serve as a roadmap for how we can grow the economy, create jobs, and 
give Americans everywhere the security they deserve.
                                                        Barack Obama.  
The White House, February 13, 2012.

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