Obama’s 2012 Budget Aims to Reduce Deficit by More Than $1 Trillion

The ""budget proposal"":http://www.whitehouse.gov/omb/budget/Overview/ released Monday by the Obama administration calls for more than $3.7 trillion in spending for fiscal year 2012, and cuts of more than $1 trillion.

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The 216 page proposal begins with a message from the president, who announces he will push to end the tax cuts for families making more than $250,000 a year, reduce the Department of Defense's funding by $78 billion over the next five years, and invest $50 billion up-front to generate jobs now and lay a foundation for future economic growth.

The budget is centered around a theme of tough decisions that must be made. In a section titled ""Putting the Nation on a Sustainable Path,"" the President announces there must be efforts to cut or consolidate a number of programs.

Among programs headed to the chopping block are 12 tax breaks for oil, gas, and coal companies; funding for new courthouse construction which will be reduced to zero; and the Department of Agriculture's single family housing direct loan program, which will be reduced by 81 percent to $211 million.

The proposal also threatens the future of ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com. The budget proposes to gradually reduce both the investment portfolios and the size and amount of loans guaranteed by Fannie and Freddie and end the conservatorship of the companies.

""Over time,"" the document reads, ""the administration will reduce the government's role in the mortgage market in a way that allows private capital to return without undermining the housing market recovery.""

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The budget says the administration is committed to presenting a framework of principles that will build a new housing finance system that minimizes taxpayer exposure to financial risk. It continues, ""We will also seek to facilitate a market that provides stable and widely available mortgage credit, affordable housing options for low and middle-income homeowners and renters, and that has stronger protections for consumers and better disclosures as mandated by the financial regulatory reform that passed last year.""

Other proposals in the budget aim to make more money through new fees and by rewriting old rules.

Among one of the most controversial proposals is the imposition of the Financial Crisis Responsibility Fee on banks with more than $50 billion in assets. The fee would be equal to .15 percent of the company's liabilities and would generate money to cover the costs of the Troubled Asset Relief Program.

Another element of the proposal is a new premium structure for FHA-insured mortgage loans. The new structure would increase the annual mortgage insurance premium by .25 percent on all 30- and 15-year loans. On average this would cost FHA borrowers about $30 more per month, and the change would only affect new loans insured by FHA on or after April 18, 2011. The President's budget projects the FHA will insure $218 billion in mortgage borrowing in 2012.

The budget includes $168 million for housing and homeowner counseling through HUD and the Neighborhood Reinvestment Corporation. It requests $19.2 billion for the Housing Choice Voucher program to help more than two million extremely low- to low-income families with rental assistance, and allots more than $2.5 billion toward efforts to end homelessness.

The budget also reduces funding for the Community Development Block Grant by 7.5 percent, or $300 million, and reduces HOME Investment Partnerships by 9.5 percent, or $175 million.

While HUD Secretary Shaun Donovan stresses that these programs are important, he said, ""Every department shares a responsibility to make tough cuts, so there's room for investments to speed economic growth. That has meant difficult programs, including reductions to programs that, absent this fiscal situation, we would not have cut.""