Obama Said to Call for 5-Year Federal Spending Freeze

(Updates with defense proposal in third paragraph, size of budget deficit in fifth.)

Jan. 25 (Bloomberg) -- President Barack Obama will propose tonight a five-year freeze of non-security discretionary spending as a way to reduce the federal government’s budget deficit, according to an administration official.

Obama plans to offer the freeze in his annual State of the Union address to Congress, the official said on condition of anonymity. It would extend the three-year freeze Obama proposed last year by an additional two years, to 2015.

The official said Obama will also look for savings in security and defense spending, and will endorse a proposal by Defense Secretary Robert Gates to cut $78 billion from the Defense budget over five years.

The fiscal 2011 budget Obama proposed last year totaled $3.8 trillion, and the administration forecast the deficit would be $1.4 trillion, compared with the $1.3 trillion shortfall for fiscal 2010. Discretionary spending outside security accounts for about 14 percent of Obama’s budget.

The freeze wouldn’t apply to spending for Social Security, Medicare, Medicaid, Homeland Security, the Defense Department or interest payments on the national debt.

The official refused to provide the administration’s estimate of how much the deficit would be cut with the extended freeze. Last year, the White House said Obama’s three-year freeze would save an estimated $250 billion over a decade and reduce the deficit by $10 billion to $15 billion in fiscal 2011.

Republicans took control of the House of Representatives in the November elections running on a pledge to cut about $100 billion from this year’s budget, though that figure was later trimmed to $60 billion to reflect that about a third of the fiscal year has passed. The House today is set to adopt a non- binding resolution underscoring the plan to cut spending.

The freeze is the latest move by Obama to rein in the federal budget deficit. The president has frozen pay for some federal workers and called on federal agencies to reduce their budget requests by 5 percent.

--With assistance from Brian Faler in Washington. Editors: Joe Sobczyk, Mark McQuillan.

To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net