Obama's budget deficits to rise from wars, recession

Obama's budget deficits to rise from wars, recession

y Steven Thomma, McClatchy Newspapers
Mon Feb 1, 5:05 pm ET

WASHINGTON — Fighting wars and lingering effects from a deep recession, President Barack Obama will run up a record $1.56 trillion budget deficit this year and is proposing a 2011 federal budget that would spend $1.27 trillion more than the government takes in next year.
Even with plans to scale back after that, his budget proposal Monday calls for deficits of more than $700 billion a year for at least a decade and relies on outside help from an as-yet un-appointed commission to bring them down more.
"It's a budget that reflects the serious challenges facing the country," Obama said at the White House . "We're at war. Our economy has lost 7 million jobs over the last two years. And our government is deeply in debt after what can only be described as a decade of profligacy."
While he said that he wanted to bring the deficit down later, he warned that the government needs to keep spending at or near its current pace to help create jobs and guarantee that the economy fully recovers. Aides said the White House feared that any quicker cut in the deficit could risk another recession akin to the one in 1937, as the country was starting to recover from the Great Depression and the government cut spending to balance its budget.
"It's very important to understand," the president said. "We won't be able to bring down this deficit overnight, given that the recovery is still taking hold and families across the country still need help."
Obama also used the budget — as much a political document as a policy plan — to blame former President George W. Bush and the Republican-led Congress in Bush's first six years for much of the fiscal crisis that the country faces.
"Over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy and funded two wars without paying for any of it, all of which was compounded by recession and by rising health care costs," Obama said.
"As a result, when I first walked through the door, the deficit stood at $1.3 trillion , with projected deficits of $8 trillion over the next decade."
He did not, however, mention that Bush also cut taxes for the working and middle classes, which Obama on Monday proposed extending permanently without any offsetting spending cuts or tax increases to pay for them. He also didn't propose ending the prescription drug benefit that the Republicans added to Medicare .
His budget plan would spawn deficits totaling $8.53 trillion over the next 10 years.
Democrats in Congress called the Obama budget the best that can be done given the high costs of war and recession.
"It will be impossible to bring the deficit down unless the economy is up. The budget the president is sending Congress today puts a priority on those objectives. It keeps one eye on the economy and the other on the deficit," said Rep. John Spratt , D- S.C. , the chairman of the House of Representatives Budget Committee .
Budget watchdog groups gave Obama credit for some parts of his proposal, but warned that more is needed to keep spiraling deficits and debts from damaging the economy permanently.
"A small spending freeze, some minor tax reforms to raise revenues and a budget commission are all excellent ideas," said Maya MacGuineas , the president of the Committee for a Responsible Federal Budget, a nonprofit fiscal-policy group.
"But this budget doesn't go nearly far enough, and it will require presidential leadership to develop a responsible fiscal plan."
Republicans, who last week helped shoot down a Senate proposal to create an independent deficit-cutting commission that they once supported, called instead for a plan of spending cuts and caps, including scaling back spending increases on entitlements such as Medicare and Social Security .
"President Obama is submitting another budget that spends too much, taxes too much and borrows too much," said House Minority Leader John Boehner , R- Ohio . "Serious fiscal responsibility requires more than a few cuts here and there at the margins. Republicans have proposed adopting strict budget caps that limit federal spending on an annual basis and are enforceable by the president."
The president's proposed budget would spend $3.83 trillion in the federal fiscal year beginning Oct. 1 , a 3 percent increase over the current year.
The budget foresees the government taking in $2.57 trillion in taxes and other revenue, an 18.6 percent jump as the deep recession ends and a growing economy boosts income. He proposed making Bush-era tax cuts permanent for those who earn less than $250,000 annually, and ending the tax reductions for those who make more than that.
Two key factors would help drive up spending or increase the deficit: war and government programs to create jobs.
First, Obama is spending more for war than he expected.
A year ago, he estimated that spending on war and intelligence operations in Afghanistan , Iraq and Pakistan would drop from the $145 billion he inherited to $129 billion in the current fiscal year. Instead, he's sending another 30,000 to 35,000 troops to Afghanistan and is asking for another $33 billion for the current year, boosting the total to $162 billion , and for $159 billion next year.
The United States is committed to withdrawing all its combat troops from Iraq by the end of 2011, and Obama has pledged to start drawing down troops from Afghanistan next year as well.
Still, his budget asks to set aside an additional $50 billion for the fiscal year that starts Oct. 1, 2011 , and again every year after that, just in case it's needed.
"These estimates do not reflect any policy decisions about specific military or intelligence operations," the president's budget says, "but are only intended to indicate that some as-yet-unknown costs are anticipated."
Second, Obama continues to propose new spending and tax cuts to help spark the economy and create jobs, atop the $787 billion stimulus package enacted last year.
Among his new proposals: $100 billion in tax cuts and credits for small businesses and spending on infrastructure to create jobs and increase wages.
Even with the added boost, the White House forecasts slow progress from the current unemployment rate of 10 percent. Christina Romer , the chair of the Council of Economic Advisers , forecasts that the jobless rate would drop to 9.8 percent this year, 8.9 percent in 2011 and 7.9 percent in 2012.
The president also proposed other spending increases for the next fiscal year, including:
— $48 billion for veterans' medical care, an 8 percent increase.
— $53 billion for homeland security, a nearly 4 percent increase, including money for 1,000 advanced imaging technology machines for airport passengers, new explosives detection equipment for baggage and more federal marshals aboard international flights.
— $310 million to close the prison at Guantanamo Bay, Cuba , including $273 million to buy a state prison at Thomson, Ill. , for those detainees who won't be released or transferred to other countries.
Obama also urged Congress to take steps that he said would shave $1.2 trillion off the deficit over the next 10 years:
— Freezing overall spending for three years for some federal departments and programs outside of national security, Medicare and Social Security .
— Slapping a fee on big banks.
— Ending subsidies for oil, gas and coal production.
— Cutting or eliminating 120 programs.
Obama projected that the deficit, while staggering in dollar terms, would drop as a share of the economy. By 2014, he said, a $706 billion budget deficit would be 3.9 percent of the economy, nearing the 3 percent level that he and his aides said would be manageable.
He proposed that a bipartisan fiscal commission find the rest of the spending cuts or tax increases that are needed.
( David Lightman and Kevin G. Hall contributed to this report.)

ON THE WEB
Extending tax cuts or letting them expire could cost Obama
U.S. economy grew 5.7% in 4th quarter, capping dismal year
Senate approves tough new spending curbs without GOP
For more McClatchy politics coverage visit Planet Washington

Democrats see GOP hypocrisy in health care debate

In the December 25, 2009 article "Democrats see GOP hypocrisy in health care debate," Associated Press writer Charles Babington reports on the hypocrisy of Republican criticism of Democratic health care proposals that add to the federal budget deficit when their own proposals from a few years ago are a significant contributor to the public debt.

WASHINGTON – Republican senators attacking the cost of a Democratic health care bill showed far different concerns six years ago, when they approved a major Medicare expansion that has added tens of billions of dollars to federal deficits.

The inconsistency — or hypocrisy, as some call it — has irked Democrats, who claim that their plan will pay for itself with higher taxes and spending cuts and cite the nonpartisan Congressional Budget Office for support.

By contrast, when Republicans controlled the House, Senate and White House in 2003, they overcame Democratic opposition to add a deficit-financed prescription drug benefit to Medicare. The program will cost a half-trillion dollars over 10 years, or more by some estimates.

With no new taxes or spending offsets accompanying the Medicare drug program, the cost has been added to the federal debt.

All current GOP senators, including the 24 who voted for the 2003 Medicare expansion, oppose the health care bill that's backed by President Barack Obama and most congressional Democrats. Some Republicans say they don't believe the CBO's projections that the health care overhaul will pay for itself. As for their newfound worries about big government health expansions, they essentially say: That was then, this is now.

Six years ago, "it was standard practice not to pay for things," said Sen. Orrin Hatch, R-Utah. "We were concerned about it, because it certainly added to the deficit, no question." His 2003 vote has been vindicated, Hatch said, because the prescription drug benefit "has done a lot of good."

Sen. George Voinovich, R-Ohio, said those who see hypocrisy "can legitimately raise that issue." But he defended his positions in 2003 and now, saying the economy is in worse shape and Americans are more anxious.

Sen. Olympia Snowe, R-Maine, said simply: "Dredging up history is not the way to move forward." She noted that she fought unsuccessfully to offset some of President George W. Bush's deep tax cuts at the time.

But for now, she said, "it's a question of what's in this package," which the Senate passed Thursday in a party-line vote. The Senate bill still must be reconciled with a House version.

The political situation is different now, Snowe said, because "we're in a tough climate and people are angry and frustrated."

Some conservatives have no patience for such explanations.

"As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt," said Bruce Bartlett, an official in the administrations of Ronald Reagan and George H.W. Bush. He made his comments in a Forbes article titled "Republican Deficit Hypocrisy."

Bartlett said the 2003 Medicare expansion was "a pure giveaway" that cost more than this year's Senate or House health bills will cost. More important, he said, "the drug benefit had no dedicated financing, no offsets and no revenue-raisers. One hundred percent of the cost simply added to the federal budget deficit."

The pending health care bills in Congress, he noted, are projected to add nothing to the deficit over 10 years.

Other lawmakers who voted for the 2003 Medicare expansion include the Senate's top three Republican leaders, all sharp critics of the Obama-backed health care plans: Mitch McConnell of Kentucky, Jon Kyl of Arizona and Lamar Alexander of Tennessee. Eleven Democratic senators voted with them back then.

The 2003 vote in the House was even more divisive. It resulted in a nearly three-hour roll call in which GOP leaders put extraordinary pressure on colleagues to back the prescription drug addition to Medicare. In the end, 204 Republicans and 16 Democrats voted for the bill.

Democrats certainly have indulged in deficit spending over the years. They say they have been more responsible over the last two decades, however. Bill Clinton's administration was largely constrained by a pay-as-you-go law, requiring most tax cuts or program expansions to be offset elsewhere with tax increases and/or spending cuts.

Clinton ended his presidency with a budget surplus. But it soon was wiped out by a sagging economy, the Iraq war, GOP tax cuts and the lapsing of the pay-as-you-go restrictions.

Obama and many Democrats in Congress have vowed to restore those restrictions. But they waived them this year for programs, including heavy stimulus spending meant to pull the economy from the severe recession of 2008-09.

The 2010 deficit is expected to reach $1.5 trillion, and the accumulated federal debt now exceeds $12 trillion. When the Republican-led Congress passed the Medicare expansion in 2003, the deficit was $374 billion, and was projected to hit $525 billion the following year, in part because of the new prescription drug benefit for seniors.

Some GOP lawmakers cite these numbers in arguing that their current worries about heavy government spending are legitimate, even if they voted for the deficit-financed Medicare bill in 2003.

But Judy Feder, an analyst with the Democratic-leaning Center for American Progress, said these Republicans had their chance and blew it. In the second Bush administration, she said, "there was a total elimination of any kind of pay-for responsibility."

Those responsible should now show some humility, she said.

Budget Hero - "If you ever wanted to control where your tax dollars go, here is your chance to decide."

Budget Hero is an online game that allows you see how different policy choices will affect the U.S. fiscal budget in the future. According to the website:

Budget Hero seeks to provide a values- and fiscal-based lens for citizens to examine policy debates during this election year. Partisan messages tend to cloud the real issues at play during campaigns, and most candidates are loath to attach detailed financial impacts to solutions which make up their platform. Budget Hero provides an interactive experience involving policy options that have been extensively researched and vetted with non-partisan government and think tank experts to enable players to objectively evaluate candidates.

U.S. federal government revenues & expenditures - 2010

According to the budget for fiscal year 2010 (which runs from October 1, 2009 to September 30, 2010), U.S. federal government revenues will be $2.381 and expenditures will be $3.55 trillion:Click on the image to enlarge it.

U.S. federal government revenues by category - 2010

According to the budget for fiscal year 2010 (which runs from October 1, 2009 to September 30, 2010), U.S. federal government revenues will be $2.381 trillion and can be divided into the following categories:

U.S. federal government spending by category - 2010

According to the budget for fiscal year 2010 (which runs from October 1, 2009 to September 30, 2010), U.S. federal government expenditures will be $3.55 trillion and can be divided into the following categories:Click on the image to enlarge it.

Social Security strained by early retirements

In the September 27, 2009 article "Social Security strained by early retirements," Associate Press writer Stephen Ohlemacher reports:

WASHINGTON – Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that's happened since the 1980s.

The deficits — $10 billion in 2010 and $9 billion in 2011 — won't affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.

Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to increase from the growing number of baby boomers reaching retirement, but they didn't expect the increase to be so large.

What happened? The recession hit and many older workers suddenly found themselves laid off with no place to turn but Social Security.

"A lot of people who in better times would have continued working are opting to retire," said Alan J. Auerbach, an economics and law professor at the University of California, Berkeley. "If they were younger, we would call them unemployed."

Job losses are forcing more retirements even though an increasing number of older people want to keep working. Many can't afford to retire, especially after the financial collapse demolished their nest eggs.

Some have no choice.

Marylyn Kish turns 62 in December, making her eligible for early benefits. She wants to put off applying for Social Security until she is at least 67 because the longer you wait, the larger your monthly check.

But she first needs to find a job.

Kish lives in tiny Concord Township in Lake County, Ohio, northeast of Cleveland. The region, like many others, has been hit hard by the recession.

She was laid off about a year ago from her job as an office manager at an employment agency and now spends hours each morning scouring job sites on the Internet. Neither she nor her husband, Raymond, has health insurance.

"I want to work," she said. "I have a brain and I want to use it."

Kish is far from alone. The share of U.S. residents in their 60s either working or looking for work has climbed steadily since the mid-1990s, according to data from the Bureau of Labor Statistics. This year, more than 55 percent of people age 60 to 64 are still in the labor force, compared with about 46 percent a decade ago.

Kish said her husband already gets early benefits. She will have to apply, too, if she doesn't soon find a job.

"We won't starve," she said. "But I want more than that. I want to be able to do more than just pay my bills."

Nearly 2.2 million people applied for Social Security retirement benefits from start of the budget year in October through July, compared with just under 1.8 million in the same period last year.

The increase in early retirements is hurting Social Security's short-term finances, already strained from the loss of 6.9 million U.S. jobs. Social Security is funded through payroll taxes, which are down because of so many lost jobs.

The Congressional Budget Office is projecting that Social Security will pay out more in benefits than it collects in taxes next year and in 2011, a first since the early 1980s, when Congress last overhauled Social Security.

Social Security is projected to start generating surpluses again in 2012 before permanently returning to deficits in 2016 unless Congress acts again to shore up the program. Without a new fix, the $2.5 trillion in Social Security's trust funds will be exhausted in 2037. Those funds have actually been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.

President Barack Obama has said he would like to tackle Social Security next year.

"The thing to keep in mind is that it's unlikely we are going to pull out (of the recession) with a strong recovery," said Kent Smetters, an associate professor at the University of Pennsylvania's Wharton School. "These deficits may last longer than a year or two."

About 43 million retirees and their dependents receive Social Security benefits. An additional 9.5 million receive disability benefits. The average monthly benefit for retirees is $1,100 while the average disability benefit is about $920.

The recession is also fueling applications for disability benefits, said Stephen C. Goss, the Social Security Administration's chief actuary. In a typical year, about 2.5 million people apply for disability benefits, including Supplemental Security Income. Applications are on pace to reach 3 million in the budget year that ends this month and even more are expected next year, Goss said.

A lot of people who had been working despite their disabilities are applying for benefits after losing their jobs. "When there's a bad recession and we lose 6 million jobs, people of all types are going to be part of that," Goss said.

Nancy Rhoades said she dreads applying for disability benefits because of her multiple sclerosis. Rhoades, who lives in Orange, Va., about 75 miles northwest of Richmond, said her illness is physically draining, but she takes pride in working and caring for herself.

In June, however, her hours were cut in half — to just 10 a week — at a community services organization. She lost her health benefits, though she is able to buy insurance through work, for about $530 a month.

"I've had to go into my retirement annuity for medical costs," she said.

Her husband, Wayne, turned 62 on Sunday, and has applied for early Social Security benefits. He still works part time.

Nancy Rhoades is just 56, so she won't be eligible for retirement benefits for six more years. She's pretty confident she would qualify for disability benefits, but would rather work.

"You don't think of things like this happening to you," she said. "You want to be in a position to work until retirement, and even after retirement."
___

On the Net:
Social Security retirement planner: http://www.ssa.gov/retire2/retirechart.htm

Most red ink ever: $9 trillion over next decade

In the August 26, 2009 article "Most red ink ever: $9 trillion over next decade," Associated Press writer Jim Kuhnhenn reports the new forecasts of upcoming U.S. federal budgets project larger deficits than previously expected:

WASHINGTON – In a chilling forecast, the White House is predicting a 10-year federal deficit of $9 trillion — more than the sum of all previous deficits since America's founding. And it says by the next decade's end the national debt will equal three-quarters of the entire U.S. economy.

But before President Barack Obama can do much about it, he'll have to weather recession aftershocks including unemployment that his advisers said Tuesday is still heading for 10 percent.

Overall, White House and congressional budget analysts said in a brace of new estimates that the economy will shrink by 2.5 to 2.8 percent this year even as it begins to climb out of the recession. Those estimates reflect this year's deeper-than-expected economic plunge.

The grim deficit news presents Obama with both immediate and longer-term challenges. The still fragile economy cannot afford deficit-fighting cures such as spending cuts or tax increases. But nervous holders of U.S. debt, particularly foreign bondholders, could demand interest rate increases that would quickly be felt in the pocketbooks of American consumers.

Amid the gloomy numbers on Tuesday, Obama signaled his satisfaction with improvements in the economy by announcing he would nominate Republican Ben Bernanke to a second term as chairman of the Federal Reserve. The announcement, welcomed on Wall Street, diverted attention from the budget news and helped neutralize any disturbance in the financial markets from the high deficit projections.

The White House Office of Management and Budget indicated that the president will have to struggle to meet his vow of cutting the deficit in half in 2013 — a promise that earlier budget projections suggested he could accomplish with ease.

"This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," said Obama economic adviser Christina Romer.

The deficit numbers also could complicate Obama's drive to persuade Congress to enact a major overhaul of the health care system — one that could cost $1 trillion or more over 10 years. Obama has said he doesn't want the measure to add to the deficit, but lawmakers have been unable to agree on revenues that would cover the cost.

What's more, the high unemployment is expected to last well into the congressional election campaign next year, turning the contests into a referendum on Obama's economic policies.

Republicans were ready to pounce.

"The alarm bells on our nation's fiscal condition have now become a siren," said Senate Minority Leader Mitch McConnell of Kentucky. "If anyone had any doubts that this burden on future generations is unsustainable, they're gone — spending, borrowing and debt are out of control."

Even supporters of Obama's economic policies said the long-term outlook places the federal government on an unsustainable path that will force the president and Congress to consider politically unpopular measures, including tax increases and cuts in government programs.

"The numbers today portend the biggest budget fight we've probably had in decades in the United States," said Stan Collender, a former congressional budget official.

The summer analyses by the White House budget office and by the Congressional Budget Office reached similarly bleak conclusions. The CBO's 10-year deficit figure was smaller — $7 trillion — but that is because it assumes that all tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011. Obama's budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.

Both budget offices see the national debt — the accumulation of annual budget deficits — as more than doubling over the next decade. The public national debt, made up of amounts the government owes to the public, including foreign governments, stood Tuesday at a staggering $7.4 trillion. White House budget officials predicted it would reach $17.5 trillion in 2019, or 76.5 percent of the gross domestic product. That would be the highest proportion in six decades.

Congressional Budget Office director Douglas Elmendorf said if Congress doesn't reduce deficits, interest rates are likely to rise, hurting the economy. But if Congress acts too soon, the economic recovery — once it arrives — could be thwarted.
"We face perils in acting and perils in not acting," Elmendorf told reporters.

David Walker, former head of the Government Accountability Office, said the numbers illustrated the need for a national commission that would review spending and taxing options and present lawmakers with a deficit reduction plan that Congress could approve or reject.

"We're going to have to do a hard course correction once we turn the corner on the economy," Walker, now president and CEO of the Peter G. Peterson Foundation, said.

Both Romer and Obama budget director Peter Orszag said this year's contraction would have been far worse without money from the $787 billion economic stimulus package that the president pushed through Congress as one of his first major acts.

At the same time, the continuing stresses on the economy have, in effect, increased the size of the stimulus package because the government will have to spend more in unemployment insurance and food stamps, Orszag said. He said the cost of the stimulus package — which spends most of its money in fiscal year 2010 — will grow by tens of billions of dollars above the original $787 billion.

The White House also credited the $3 billion cash-for-clunkers auto program for contributing to recent economic growth.

Orszag, anticipating backlash over the deficit numbers, conceded that the long-term deficits are "higher than desirable." The annual negative balances amount to about 4 percent of the gross domestic product, a number that many economists say is unsustainable.

But Orszag also argued that overhauling the health system would reduce health care costs and address the biggest contributor to higher deficits.

"I know there are going to be some who say that this report proves that we can't afford health reform," he said. "I think that has it backward."

At the same time, 10-year budget projections can be "wildly inaccurate," said Collender, now a partner at Qorvis Communications. Collender noted that there will be five congressional elections over the next 10 years and any number of foreign and domestic challenges that will make actual deficit figures very different from the estimates.

David M. Walker, the former Comptroller General of the United States, holds a B.S. degree in accounting from Jacksonville University.

Reductions in Defense Spending?

A March 17, 2009 article in the Boston Globe entitled "Gates readies big cuts in weapons" outlines how Defense Secretary Robert M. Gates wants to reduce military spending:

Gates readies big cuts in weapons
Battle looms with Congress
By Bryan Bender, Globe Staff | March 17, 2009

WASHINGTON - As the Bush administration was drawing to a close, Robert M. Gates, whose two years as defense secretary had been devoted to wars in Iraq and Afghanistan, felt compelled to warn his successor of a crisis closer to home.

The United States "cannot expect to eliminate national security risks through higher defense budgets, to do everything and buy everything," Gates said. The next defense secretary, he warned, would have to eliminate some costly hardware and invest in new tools for fighting insurgents.

What Gates didn't know was that he would be that successor.

Now, as the only Bush Cabinet member to remain under President Obama, Gates is preparing the most far-reaching changes in the Pentagon's weapons portfolio since the end of the Cold War, according to aides.

Two defense officials who were not authorized to speak publicly said Gates will announce up to a half-dozen major weapons cancellations later this month. Candidates include a new Navy destroyer, the Air Force's F-22 fighter jet, and Army ground-combat vehicles, the offi cials said.

More cuts are planned for later this year after a review that could lead to reductions in programs such as aircraft carriers and nuclear arms, the officials said.

As a former CIA director with strong Republican credentials, Gates is prepared to use his credibility to help Obama overcome the expected outcry from conservatives. And after a lifetime in the national security arena, working in eight administrations, the 65-year-old Gates is also ready to counter the defense companies and throngs of retired generals and other lobbyists who are gearing up to protect their pet projects.

"He has earned a great deal of credibility over the past two years, both inside and outside the Pentagon, and now he is prepared to use it to lead the department in a new direction and bring about the changes he believes are necessary to protect the nation's security," said Geoff Morrell, the Pentagon press secretary.

Gates is not the first secretary to try to change military priorities. His predecessor, Donald H. Rumsfeld, sought to retool the military but succeeded in cancelling only one major project, an Army artillery system.

Former vice president Dick Cheney's efforts as defense chief under the first President Bush, meanwhile, are cited as a case study in the resistance of the military, defense industry, and Capitol Hill. Cheney canceled the Marine Corps' troubled V-22 Osprey aircraft not once, but four times, only to see Congress reverse the decision.

"There are so many people employed in the industry and they are spread across the country," William S. Cohen, former Republican senator from Maine who was Defense secretary in the Clinton administration, said in an interview. "Even though members of Congress may say, 'It's great that you are recommending the termination of X, Y, and Z,' they will also say 'that means 4,000 jobs in my state. Frankly, I can't go along with that.' "

Major weapons cuts could be an even tougher sell now, he added. "When you start talking about an economy that is in a state of considerable turmoil it becomes even more difficult," Cohen said.

Yet even some of the Pentagon's fiercest critics, such as Winslow Wheeler of the liberal Center for Defense Information, believe the Obama administration may have a unique opportunity with Gates at the helm.

Wheeler, a former Capitol Hill defense aide, noted that Gates has shown a unique toughness, including removing the Army secretary and the civilian and military heads of the Air Force for lapses on their watch.

"That demonstrates there is a spine there," said Wheeler.

Such dramatic moves were easier for Gates because he spent much of his career as an intelligence analyst warning about the threats of Soviet Communism. Now, as a Cold War veteran in an administration perceived to be lacking in defense experience, he is perhaps the only person capable of pushing through big cutbacks.

"He obviously has huge credibility as something of a hawk," said James Shinn, who worked for Gates as assistant Defense secretary in the Bush administration. "No one can even remotely challenge Gates in terms of his well-informed and conservative approach toward threats and the weapon systems associated with threats."

In between briefing books and intelligence assessments, Gates recently read "Agincourt," a novel about the medieval battle in which the British Army routed a much larger French force with a new weapon, the longbow, that was able to penetrate French armor. A turning point in the Hundred Years War, in 1415, the battle could serve as an analogy for the changes Gates believes are necessary to pursue terrorists.

Today's security threats, Gates believes, are far different from when, during his first week on the job as a CIA analyst in 1968, the Soviet Army invaded Czechoslovakia.

"Let's be honest with ourselves," Gates told the National Defense University last September. "The most likely catastrophic threats to our homeland - for example, an American city poisoned or reduced to rubble by a terrorist attack - are more likely to emanate from failed states than from aggressor states."

Gates has said it would be "irresponsible" not to plan for the possibility that another nation could threaten US military dominance, but he pointed out that the US Navy is larger than the next 13 navies combined, 11 of which are American allies.

"US air and sea forces have ample untapped striking power should the need arise to deter or punish aggression - whether on the Korean Peninsula, in the Persian Gulf, or across the Taiwan Strait," he wrote in the latest issue of Foreign Affairs magazine.

As for fears of a resurgent Russia, Gates said, "As someone who used to prepare estimates of Soviet military strength for several presidents, I can say that Russia's conventional military, although vastly improved since its nadir in the late 1990s, remains a shadow of its Soviet predecessor."

Gates's budget plans remain closely guarded, but aides say his decisions will be guided by the time he has spent with soldiers in Iraq and Afghanistan.

One aide who has traveled with Gates more than a dozen times said the secretary "is particularly keen and aware of the urgent operational needs on the ground."

That likely means greater investments in intelligence-gathering systems such as pilotless drone aircraft, special-operations forces and equipment, and advanced cultural training for military personnel, aides said.

Girding for a showdown with Congress, Gates took the unusual step of making the Joint Chiefs of Staff and other participants in budget deliberations sign nondisclosure agreements to prevent leaks.

But already lawmakers and defense contractors are preparing to fight back. Lockheed, maker of the F-22 jet, recently launched an ad campaign to protect its fighter. Northrop Grumman, which could face cutbacks to its ship-building programs, has hired consultants to write op-eds. Unions are raising alarms about job losses.

Even his closest friends acknowledge Gates is in the bureacratic fight of his life.

"He is going to have a hard time," said former US national security adviser and retired Air Force Lieutenant General Brent Scowcroft, who is considered Gates's mentor and speaks to his protoge frequently. "The resistance in the system is heavy. But that what Bob is trying to take on."

Bender can be reached at bender@globe.com.

2010 U.S. Federal Budget - by category of spending

Click on the image above to enlarge it.

The Budget of the United States Government provides a breakdown of federal government spending by category.

The President's budget for 2010 totals $3.55 trillion. Percentages in parentheses indicate percentage change compared to 2009. This budget request is broken down by the following expenditures:

Mandatory spending: $2.184 trillion (+15.6%)
$695 billion (+4.9%) - Social Security
$453 billion (+6.6%) - Medicare
$290 billion (+12.0%) - Medicaid
$0 billion (-100%) - Troubled Asset Relief Program (TARP)
$0 billion (-100%) - Financial stabilization efforts
$11 billion (+275%) - Potential disaster costs
$571 billion (-15.2%) - Other mandatory programs
$164 billion (+18.0%) - Interest on National Debt

Discretionary spending: $1.368 trillion (+13.1%)
$663.7 billion (+12.7%) - Department of Defense (including Overseas Contingency Operations)
$78.7 billion (-1.7%) - Department of Health and Human Services
$72.5 billion (+2.8%) - Department of Transportation
$52.5 billion (+10.3%) - Department of Veterans Affairs
$51.7 billion (+40.9%) - Department of State and Other International Programs
$47.5 billion (+18.5%) - Department of Housing and Urban Development
$46.7 billion (+12.8%) - Department of Education
$42.7 billion (+1.2%) - Department of Homeland Security
$26.3 billion (-0.4%) - Department of Energy
$26.0 billion (+8.8%) - Department of Agriculture
$23.9 billion (-6.3%) - Department of Justice
$18.7 billion (+5.1%) - National Aeronautics and Space Administration
$13.8 billion (+48.4%) - Department of Commerce
$13.3 billion (+4.7%) - Department of Labor
$13.3 billion (+4.7%) - Department of the Treasury
$12.0 billion (+6.2%) - Department of the Interior
$10.5 billion (+34.6%) - Environmental Protection Agency
$9.7 billion (+10.2%) - Social Security Administration
$7.0 billion (+1.4%) - National Science Foundation
$5.1 billion (-3.8%) - Corps of Engineers
$5.0 billion (+100%) - National Infrastructure Bank
$1.1 billion (+22.2%) - Corporation for National and Community Service
$0.7 billion (0.0%) - Small Business Administration
$0.6 billion (-14.3%) - General Services Administration
$19.8 billion (+3.7%) - Other Agencies
$105 billion - Other

SIX CATEGORIES OF SPENDING COMPRISE MORE THAN 75% OF THE U.S. FEDERAL BUDGET:

Social Security
Medicare
Medicaid and the State Children's Health Insurance Program (SCHIP)
Unemployment/Welfare/Other mandatory spending
Interest on National Debt
Department of Defense

SERIOUS DISCUSSIONS ABOUT REDUCING THE SIZE AND SCOPE OF FEDERAL GOVERNMENT SPENDING MUST ADDRESS THESE CATEGORIES.

U.S. Federal Budget - Fiscal Year 2008

The U.S. Federal Budget for fiscal year 2008.

The U.S. Federal Budget for Fiscal Year 2009

The U.S. Federal Budget for fiscal year 2009, which runs from October 1, 2008 through September 30, 2009.

2009 U.S. Federal Budget - by category of spending

Click on the image above to enlarge it.

The Budget of the United States Government provides a breakdown of federal government spending by category.

The President's budget for 2009 totals $3.1 trillion. Percentages in parentheses indicate percentage change compared to 2008. This budget request is broken down by the following expenditures:

Mandatory spending: $1.89 trillion (+6.2%)
$644 billion - Social Security
$408 billion - Medicare
$224 billion - Medicaid and the State Children's Health Insurance Program (SCHIP)
$360 billion - Unemployment/Welfare/Other mandatory spending
$260 billion - Interest on National Debt

Discretionary spending: $1.21 trillion (+4.9%)
$515.4 billion - United States Department of Defense
$145.2 billion(2008*) - Global War on Terror
$70.4 billion - United States Department of Health and Human Services
$45.4 billion - United States Department of Education
$44.8 billion - United States Department of Veterans Affairs
$38.5 billion - United States Department of Housing and Urban Development
$38.3 billion - State and Other International Programs
$37.6 billion - United States Department of Homeland Security
$25.0 billion - United States Department of Energy
$20.8 billion - United States Department of Agriculture
$20.3 billion - United States Department of Justice
$17.6 billion - National Aeronautics and Space Administration
$12.5 billion - United States Department of the Treasury
$11.5 billion - United States Department of Transportation
$10.6 billion - United States Department of the Interior
$10.5 billion - United States Department of Labor
$8.4 billion - Social Security Administration
$7.1 billion - United States Environmental Protection Agency
$6.9 billion - National Science Foundation
$6.3 billion - Judicial branch (United States federal courts)
$4.7 billion - Legislative branch (United States Congress)
$4.7 billion - United States Army Corps of Engineers
$0.4 billion - Executive Office of the President
$0.7 billion - Small Business Administration
$7.2 billion - Other agencies
$39.0 billion(2008*) - Other Off-budget Discretionary Spending

The financial cost of the Iraq War and the War in Afghanistan are not part of the defense budget; they are appropriations.

SIX CATEGORIES OF SPENDING COMPRISE MORE THAN 75% OF THE U.S. FEDERAL BUDGET:

$644 billion - Social Security
$408 billion - Medicare
$224 billion - Medicaid and the State Children's Health Insurance Program (SCHIP)
$360 billion - Unemployment/Welfare/Other mandatory spending
$260 billion - Interest on National Debt
$515.4 billion - United States Department of Defense

SERIOUS DISCUSSIONS ABOUT REDUCING THE SIZE AND SCOPE OF FEDERAL GOVERNMENT SPENDING MUST ADDRESS THESE CATEGORIES.