Obama's Budget Picture Forms

Call it the White House austerity plan. President Obama's budget outline for 2010, to be released tomorrow,  assumes that committee chairs will cap non-defense discretionary spending increases at one half of one percent over 2009 levels, according to people who have been briefed on the subject. Federal workers would receive raises of approximately 1 2 percent, or about eight tenths of a percent above the core inflation rate.

The Democrats' omnibus appropriations bill for the rest of the 2009 fiscal year increases domestic spending by an average over departments of more than six percent over 2008 levels. In  2010, the White House wants to spend about $537 billion to fund the Department of Defense, and it plans to ask for as much as $170 billion to fund continuing operations in Afghanistan and a drawndown in Iraq.

An Office of Management and Budget spokesperson declined to confirm the number, saying only that more details would be released tomorrow.

The budget will include projections based on the assumption that Congress will pass intact legislation dealing with Obama's top priorities, like the revenue that would flow to the government from an emissions permit trading system, the treatment of profit earned by hedge fund managers as taxable income, and the discontinuation of extra payments to insurance companies that offer HMOs and PPOs through Medicare.

According to ABC News's Jake Tapper, Obama will also endorse Medicare premium increases for seniors making more than $170,000 per year.

Late this afternoon, a White House official told reporters that the budget would include a $634 billion reservoir to pay for health care reform; it would be funded by a mix of tax increases on wealthy Americans, reimbursement rate changes, and program cuts.  The Washington Post reported that Obama will to raise the rates at which drug companies pay back the government.

Monday night, Obama said that he and his team had identified more than $2 trillion in potential savings over ten years, although he did not specify which other programs he would cut.