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wsj.com | WASHINGTON—President Barack Obama's $3.73 trillion budget proposal for fiscal-year 2012 marks the start of a long fight with congressional Republicans about the depth of spending cuts.

WSJ's David Wessel reports on President Obama's proposed $3.73 trillion budget which calls for just over $1 trillion in spending cuts. Also, Apple plans to release a line of lower-priced iPhones that would compete with other smartphones on the market.

Mr. Obama's budget offers up more than $1 trillion in deficit reductions over a 10-year period—three-quarters coming from spending cuts and the balance from tax increases or the elimination of existing tax breaks.

In fiscal 2012 alone, the administration proposed reducing or closing 200 federal programs at a savings of $33 billion. Proposed cuts would hit Democratic priorities such as the Low Income Home Energy Assistance Program, which would stand to lose $2.5 billion, or community-development grants, which would suffer a $300 million reduction.

Budget Crunching

Mr. Obama said the cuts fall on "many programs whose mission I care deeply about, but meeting our fiscal targets while investing in our future demands no less."

The White House budget acknowledges the cuts rest on the non-security, discretionary-spending portion of the budget, which represents approximately 12% of all spending. "The solution to our long-term fiscal problems cannot rest on this alone," the budget document noted.

Republican lawmakers criticized Mr. Obama for failing to spell out how to reduce entitlement spending on Social Security and Medicare.

"We're not having any leadership" at all, Sen. Jeff Sessions (R., Ala.), the top Republican on the Senate budget committee said on CNN. "I do believe he deserves serious criticism for that." Mr. Sessions added his party stood ready to begin negotiations with Mr. Obama on overhauling the entitlement programs.

The White House also came under attack from David Walker, the former U.S. comptroller general and a long-time fiscal hawk.

"The budget contains language that notes the importance of addressing our nation's structural deficits, however, it is largely void of concrete proposals and specific time lines for addressing them," Mr. Walker said.

The proposed savings from Mr. Obama go nowhere near the short-term reductions that House Republicans are pushing for. And many of these proposed budget cuts and tax increases were on the table earlier and met strong opposition in Congress.

Republicans now are focused on a short-term budget battle. Friday night, the party's leaders released details of a plan to slash $62 billion in the remaining 7½ months of fiscal 2011, and they promised to cut more in their fiscal 2012 budget plan.

And the proposed Obama budget reductions don't come close to the $4 trillion in savings recommended by a White House-appointed deficit commission. This is largely because the president's budget shies away from pushing for any substantial changes to the entitlement programs Medicare, Medicaid or Social Security. Nor does it include a specific outline for overhauling either the corporate or individual tax codes.

On Social Security, Mr. Obama sought to start the conversation by outlining a series of principles for an overhaul effort. He is proposing no reductions in basic benefits for seniors, and future beneficiaries could not see their "benefits slashed."

The broader story in Mr. Obama's budget seeks to balance two agendas: dramatic cuts to federal spending while also investing in programs to improve U.S. competitiveness.

"My budget makes investments that can help America win this competition and transform our economy, and it does so fully aware of the very difficult fiscal situation we face," Mr. Obama said in his budget message.

His budget would boost funding for the Department of Education to $77 billion from the $64 billion it received in fiscal 2010. The money would be used to increase education competitiveness and increase the number of science, engineering and math teachers in schools by 100,000.

At the same time, the president called for a five-year non-security discretionary-spending freeze and a two-year freeze of federal government employees' salaries. The budget plan discusses how the proposed cuts to discretionary spending were only a beginning to addressing the core fiscal problems facing the country.

Mr. Obama, speaking at an education event in Baltimore, said his budget plan responds to the goals of the fiscal commission.

"The only way to truly tackle our deficit is to cut excessive spending wherever we find it, in domestic spending, defense spending, health-care spending, and spending through tax breaks and loopholes,'' Mr. Obama said. "So what we've done here is make a down payment.''

Under the president's budget, the deficit as a share of U.S. gross domestic product would decline from its projected 10.9% in fiscal 2011 to 2.9% by fiscal 2018. Most economists agree that a deficit lower than 3% of GDP is sustainable. But then under the White House budget, the deficit would begin increasing again as a share of GDP in the latter years of the decade, largely as a result of the costs of the entitlement programs.

Mr. Obama does propose aggressively cutting the Pentagon's budget—which along with the entitlement programs and interest on the national debt account for the lion's share of federal spending.

He would cut defense spending by $78 billion over the next five years, bringing the Pentagon budget down to zero real growth. Combined with reduced expected spending on the wars in Iraq and Afghanistan in the coming years, that would reduce defense spending substantially.

On the investment side, Mr. Obama called again for making the research and development tax credit permanent—at a cost of $106 billion over the next decade.

The budget would maintain the maximum $5,500 grant available to poorer college students—it would pay for the substantial cost of doing so by eliminating the grant's availability during summer school, and interest would begin accruing on loans taken out by graduate students from their inception.

 
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