US Budget constraints limit Barack Obama's second-term agenda

Obama

INCREASING ECONOMIC MOBILITY

Instead, the caps cover the 36 percent of government spending that is set annually by Congress. Known as discretionary spending, this category covers everything from the Defense Department to the National Endowment for the Arts.

It also includes social programs that Obama allies say are crucial for his agenda of broadening opportunity and expanding the middle class.

"If you were looking into all the corners of the budget to find those programs that helped to promote the economic mobility of disadvantaged people, many, if not most, would be there," said Jared Bernstein, a former economic adviser to Vice President Joe Biden.

The White House estimates that nonmilitary discretionary spending will shrink from 4.3 percent of the economy in the fiscal year that ended on Sept. 30, 2011 to 2.8 percent when he leaves office in January 2017. That would be the lowest level since the government began keeping track in 1962.

An automatic cut due to take effect in March, known as the "sequester," will slash discretionary spending another 8 percent unless Democrats and Republicans agree on a way to head it off.

Obama frequently invokes the spending caps to rebut Republican charges that he does not care about reducing trillion-dollar deficits. He proposed another $100 billion in non-military discretionary cuts during his fiscal-cliff talks last month with Republican House of Representatives Speaker John Boehner.

But he also warns that deep program cuts will undermine future competitiveness. "The cuts we've already made ... mean that we spend less as a share of our economy than has been true for a generation," he said at a news conference on Monday. "And that's not a recipe for growth."

The White House says it will be able to work within the spending caps to prioritize the areas it cares about most.

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