President Obama's three-year spending freeze at nonsecurity agencies won't have much impact on federal programs in 2011 — but it will serve as a long-term check on the growth of many departments and agencies.
The freeze excludes the majority of Cabinet-level departments: Eight of the 15 will see their budgets increase under Obama's plan. And even among "frozen" departments, the freeze isn't uniform: The budget caps nonsecurity discretionary spending at $447 billion — but individual agencies can continue to grow, as long as overall spending stays within limits.
One example: The Agriculture Department's discretionary budget will shrink by about 5 percent, to $23.9 billion, but the Food and Nutrition Service — the largest Agriculture agency — will grow by more than $200 million, a 3 percent increase.
"It's not an across-the-board freeze in the sense of each individual item being frozen, each individual program," said Peter Orszag, director of the Office of Management and Budget. "Instead it represents an overall cap on the level of nonsecurity discretionary spending."
The freeze's larger impact is likely to be felt in the long term — over the next five to 10 years. Obama's budget doesn't plan to compensate for the freeze with big increases in 2014, so the policy will effectively slow the growth of government. Many nonsecurity agencies will see their budgets grow more slowly than projected in Obama's 2010 budget plan.
Obama's 2010 plan called for a $284.9 billion budget for the Education Department over the next five years, for example. His 2011 plan reduces that projection to $254.1 billion — a 10.8 percent decrease.
The freeze also excludes money from the $787 billion American Recovery and Reinvestment Act, so agencies that saw big increases from the stimulus bill will see their budgets return to normal over the next few years.
"The freeze is off the base in 2010, which excludes the Recovery Act," Orszag said at a news conference last week. "The notion that we raised prices before putting something on sale is misleading."
Experts say the freeze could have a few short-term impacts on nonsecurity agencies. The $447 billion cap doesn't adjust for inflation — so agencies will have to make room in their budgets to accommodate pay raises over the next three years. Agencies might pay for those raises by slashing items viewed as unnecessary, like travel spending and training expenses.
"In terms of actual impact, it's pretty modest," said John Palguta, vice president for policy at the Partnership for Public Service. "But there's a psychological impact ... as soon as you tell federal agencies their budgets are frozen, they go into worst-case planning mode. They stop paying for training. They say, ‘Let's see how many jobs we can get away with not filling.' "
Union leaders say they expect the government will continue hiring new employees, despite the cap. John Gage, president of the American Federation of Government Employees, told reporters agencies can keep hiring by using money saved by insourcing — assigning to feds work now done by contractors.
"Obama's freeze is not on [full-time equivalents]," Gage said. "It is on overall aggregate money. ... Many of these agencies will be able to achieve their goals, because of the insourcing, because they are cutting so many of these expensive contracts that have been out there."
Critics say the freeze is mostly for show and unlikely to have a big influence on the federal deficit. OMB estimates it will save about $250 billion over the next decade — about 3 percent of a deficit that's projected to total $8.5 trillion over the same 10 years.
"[It's] like trying to empty the ocean with a teaspoon," said Brian Gumm, a spokesman for the nonprofit OMB Watch. "It misses the major structural problems … and it ignores the waste, fraud and abuse in military contracting."
OMB officials said the president is unwilling to cap military spending during wartime — but said the Defense Department is "imposing restraint" of its own by slashing unneeded military programs, like a second engine for the F-35 Joint Strike Fighter.
"We need to remember ... we're at war, and we need to make sure that we adequately fund our troops while we're at war," Orszag said. "But there is significant restraint being imposed."
Still, the Pentagon's baseline budget — which excludes spending for the wars in Iraq and Afghanistan — will grow by 3.4 percent this year, under Obama's request, and by 16 percent over the next five years.







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