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									                   BUILDING A STRONG ECONOMY

   When the President took office, the economy             that challenged the economic expansion: up-
was losing over 700,000 private sector jobs a              risings in the Middle East that sent oil prices
month, and experiencing the worst two quarters             higher; an earthquake in Japan that prevented
of growth since the end of World War II. Due to            American auto and manufacturing companies
swift action taken by the President shortly af-            from getting the supplies they needed to keep
ter taking office, the Nation avoided what could           our factories producing; and widespread sover-
have been a second Great Depression—and has                eign debt concerns in Europe that roiled markets
now experienced 22 consecutive months of pri-              across the globe. In addition, the willingness of
vate sector job growth, with 3.2 million jobs cre-         Republicans in Congress to risk the first default
ated. In just the first few months of 2009, the            in our Nation’s history over the statutory debt
President’s strong leadership produced a Recov-            ceiling and the subsequent downgrade by Stan-
ery Act to bolster American families against the           dard & Poor’s of the long-term sovereign rating
worst of the crisis, as well as a rescue of the auto       of U.S. Treasuries and other debt tied to the U.S.
industry and the stabilization of our financial            credit rating kept financial markets on edge and
system which, together, prevented our economy              appeared to rattle consumer confidence.
from spiraling into a deep depression.
                                                              In the face of these headwinds, the policies
   At the beginning of 2011, our economy was               enacted by the President played a key role in
gaining traction after enduring an historic reces-         keeping the economy moving forward. Because
sion and coming back from the brink of a depres-           of the policies that the President fought for, the
sion. During the previous six quarters, real gross         typical working family received a $1,000 payroll
domestic product (GDP) had grown at an aver-               tax cut in 2011, and millions of Americans pound-
age annual rate of 3 percent and, over the pre-            ing the pavement looking for jobs could continue
vious 12 months, the private sector had created            to receive unemployment insurance (UI). This
1.3 million new jobs. The financial system was no          provided crucial insurance against headwinds
longer in crisis. The credit and capital markets           buffeting our economy.
were functioning, and the cost of stabilizing the
financial and automobile sectors was amounting               While concerns lingered over the financial de-
to a fraction of initial estimates. We subsequently        velopments in Europe and the risk they posed to
learned that the recession was deeper than many            the U.S. economy, the pace of real GDP growth
experts first thought: revised estimates showed            increased in the second half of the year. Early in
that the economy contracted at an 8.9 percent              2011, job growth picked up and the unemploy-
annualized rate in the last quarter of 2008, from          ment rate fell, but progress slowed in the spring
an original projection of 3.8 percent, the largest         and summer before picking up again in the fall.
quarterly downward revision in history. A trio             Overall, the unemployment rate fell over the
of world events then created strong headwinds              course of the year, from 9.4 percent in December

10                                                                  BUILDING A STRONG ECONOMY

2010 to 8.5 percent in December 2011, and the          over extending the debt ceiling during the sum-
economy added 1.9 million private sector jobs in       mer; and finally in the President’s Plan for Eco-
2011. Over the last two months of 2011, consumer       nomic Growth and Deficit Reduction that was
confidence jumped, nearing its high prior to the       presented to the Joint Select Committee on Defi-
Japanese earthquake; housing starts were higher        cit Reduction in September. It also is why the
in November than they were in May; and after           President proposed the American Jobs Act (AJA)
declining in August, the manufacturing Purchas-        last September, a plan to put more people back
ing Managers Index (PMI) has now increased to          to work, put more money in the pockets of work-
53.9, indicating an economic expansion.                ing Americans, and do so without adding a dime
                                                       to the deficit. This combination of tax cuts, in-
   Despite these encouraging signs, economic           frastructure investments, and aid to those seek-
growth was not strong enough to create a suffi-        ing work would give the economy a needed boost
cient number of good jobs for all of the Americans     through this difficult time.
who wanted to work or robust enough to restore
for the middle class the security and opportuni-          Unfortunately, at each step, partisan divides
ty they deserved. At the same time, our country        and unwillingness by Republicans in Congress
still faced the consequences of years of fiscal ir-    to ask the wealthiest among us to pay their fair
responsibility. When the President took office, he     share through any revenue increases prevented
inherited an annual deficit of $1.3 trillion and       a comprehensive deficit reduction agreement or
projected deficits of trillions more in the years      measures in the AJA to boost demand from being
thereafter. Driving these deficits were decisions      enacted. Indeed, this lack of real progress on both
made over the previous eight years not to pay for      the AJA and deficit reduction actually became a
two tax cuts and a Medicare prescription drug          drag in and of itself on an economy already strug-
benefit. The deficits were then exacerbated by the     gling to recover from a severe recession and bat-
recession: the sharp decline in receipts, steep in-    tling significant headwinds from events around
crease in automatic outlays to help those in need,     the globe.
and efforts needed to jumpstart economic growth.
                                                          As we look forward, the challenges of this past
   Recognizing the challenges still facing the eco-    year persist: to build an economy that will grow
nomic recovery, the Administration believes that       robustly and create good jobs that pay well for
short-term efforts to boost economic growth and        years to come, and to put the country on a sustain-
job creation plus comprehensive, balanced efforts      able fiscal path through deficit reduction that is
to put the United States on the path toward fiscal     balanced and asks all Americans to pay their fair
stability were both needed. These are complemen-       share. This Budget lays out the President’s vision
tary policies: a growing economy is necessary for      to accomplish both. It will take tough choices—
long-term deficit reduction, and likewise, long-       cutting waste as well as some valuable programs
term deficit reduction and fiscal sustainability is    that we would not cut if not for the fiscal situ-
necessary to maintain and strengthen economic          ation. It will entail undertaking actions now to
growth for years to come.                              support and strengthen economic growth. And it
                                                       will take reallocating resources to allow targeted
   That is why the President pursued significant,      investments so that we have an economy based
balanced deficit reduction throughout calendar         not on speculation and bubbles, but one that is
year 2011: first, in his 2012 Budget; then, in the     built on the solid foundation of an educated work-
Framework for Shared Prosperity and Shared             force, cutting-edge innovation, and world-class
Fiscal Responsibility released in April that built     infrastructure.
on the Budget to identify $4 trillion in deficit re-
duction; next, in a similarly sized plan presented
to congressional Republicans during negotiations
THE BUDGET FOR FISCAL YEAR 2013                                                                        11

       Managing and Winding doWn                       form the economy to compete in the 21st Century.
        Urgent recovery efforts                        Approximately one-third of the Act’s funds were
                                                       targeted to tax cuts for small businesses and 95
   When the President took office the economy          percent of working families. Another third was
was in free-fall. Real GDP was dropping at an          used for emergency relief for those who bore the
annual rate of 6.7 percent in the first quarter of     brunt of the recession. For example, more than
2009, after falling at an annual rate of 8.9 percent   17 million Americans benefited from extended or
the previous quarter. A seizure of credit markets      increased unemployment benefits, and health in-
in late 2008 caused companies to lay off workers       surance was made 65 percent less expensive for
and cut costs at an unprecedented rate. A steep        laid-off workers and their families who relied on
decline in the stock market combined with fall-        COBRA. The final third was invested in projects
ing home prices led to an enormous loss of house-      to create jobs, spur economic activity, and lay
hold wealth. Between the third quarter of 2007         the foundation for future sustained growth. Aid
and the first quarter of 2009, the real net worth      to State and local governments helped to close
of American households declined by 27 percent—         budget shortfalls, supporting the jobs of more
the equivalent of more than one year’s GDP.            than 650,000 teachers, firefighters, and police of-
Americans reacted to this massive loss of wealth       ficers. By the end of 2011, almost 95 percent of
by saving more instead of spending. The personal       Recovery Act spending was obligated and 100
savings rate spiked at 6.2 percent in the second       percent of the tax relief had been provided. Near-
quarter of 2009, after averaging only 2 percent        ing the third anniversary of the Recovery Act, it
through the end of 2007. This had the effect of        is clear—and confirmed by independent analysts
reducing consumer demand, a key driver of eco-         ranging from the Congressional Budget Office
nomic growth. The economy was in the worst             (CBO) to private-sector forecasters—that these
downturn since the Great Depression, with sig-         swift and significant actions in the Recovery Act
nificant risk that conditions could worsen. That       bolstered economic growth and created or pre-
is why the Administration took swift action to         served millions of jobs.
jumpstart economic growth and avoid a second
Great Depression.                                         Progress has continued with sustained efforts
                                                       by the Administration to ensure that Recovery
   We now know that these efforts were even            Act funds continue to be spent expeditiously and
more critical to the recovery than it appeared at      in ways that create jobs and grow our economy,
the time, as the decline we were in was deeper         both now and in the future. In September 2011,
than anyone, at the time, knew. Now, as we work        the Administration directed Federal agencies to
to build an economy that remains strong, sta-          accelerate spending on the remaining Recovery
ble and creating good jobs, the Administration         Act funds for purposes that would create jobs
is managing, and in some cases, winding down           right away, and is working closely with States,
these critical recovery efforts.                       Tribes, local governments, and others on these ef-
                                                       forts. Since this effort began, agencies have spent
                                                       approximately $17 billion in additional discre-
The Recovery Act                                       tionary funds, bringing the total amount of un-
                                                       spent discretionary funds down to less than $60
   Faced with the collapse of the economy, the Ad-     billion. In addition, 2011 saw investment and
ministration took decisive action to bolster mac-      work begin in earnest on a number of long-term
roeconomic demand and jumpstart economic ac-           initiatives that were funded through the Recov-
tivity, thus breaking the back of a recession that     ery Act and are critical to creating a 21st Century
was spiraling out of control. The President moved      economy and infrastructure. In particular, signa-
rapidly, working with the Congress, and just 28        ture pieces of the Recovery Act dealing with high
days after taking office, signed into law the Recov-   speed rail, broadband, clean energy, and health
ery Act to create and save jobs, as well as trans-
12                                                                    BUILDING A STRONG ECONOMY

information technology began to ramp up, paving          financial system to prevent deep panic in every
the way for long-term economic prosperity.               sector of our economy is now projected to be only
                                                         one-fifth of the initially estimated cost.
  Reviewing the overall impact of the Recovery
Act, the White House Council of Economic Advis-            The tasks ahead for TARP are to recover the
ers (CEA) estimates that the Recovery Act raised         remaining investments in the financial sector
the level of GDP by the end of 2011, relative to         and auto industry in a manner that continues to
what it would have been absent intervention, by          promote financial stability while also maximiz-
between 2 and 2.9 percentage points. These es-           ing the return for taxpayers. In addition, the Ad-
timates closely parallel those of a wide range of        ministration will continue to use TARP funds to
outside analysts, including CBO. The CEA also            assist homeowners seeking to avoid foreclosure.
estimates that the Recovery Act raised employ-
ment relative to what it otherwise would have
been by between 2.2 and 4.2 million jobs in the          The Automobile Industry
same time frame.
                                                            As a result of the President’s aggressive and
                                                         effective intervention, we are seeing a notable
The Troubled Asset Relief Program                        turnaround in the automobile industry at a lower
                                                         cost than originally estimated. In late 2008, the
   A central part of the response to the financial       combination of an historic recession and finan-
crisis was the implementation of the Troubled            cial crisis pushed the American auto industry
Asset Relief Program (TARP), which was estab-            to the brink of collapse. Access to credit for car
lished in the fall of 2008 under the Emergency           loans dried up and motor vehicle sales plunged 40
Economic Stabilization Act of 2008. TARP suc-            percent. Auto manufacturers and suppliers dra-
ceeded in helping to stop widespread financial           matically curtailed production. In the year before
panic and helped prevent what could have been            President Obama took office, the industry shed
a devastating collapse of our financial system.          over 250,000 jobs. By late 2008, General Motors
The Government’s authority to make new in-               (GM) and Chrysler were on the brink of liquida-
vestments through the program expired on Oc-             tion, which would have inflicted immediate and
tober 3, 2010, and TARP is now winding down.             lasting damage to the country’s manufacturing
The U.S. Department of the Treasury (Treasury)           and industrial base. It also would have produced
has already recovered more than three-fourths of         a significant rise in both regional and national
all the funds it disbursed, and the Government           unemployment, and would have further damaged
is now estimating the recovery of more funds for         the financial system since automobile financing
the taxpayers and at a faster rate than predicted        is a significant portion of overall financial activ-
at the inception of the program.                         ity. Moreover, if these companies had gone out of
                                                         business, the economy would have been forced
   As of November 30, 2011, Treasury has received        deeper into recession and might have fallen into
$318 billion in TARP repayments, interest, fees,         a depression. The President made a difficult deci-
and other income of the $413 billion disbursed.          sion to provide support to GM and Chrysler on
When it started, independent observers such              the condition that they, and all of their stakehold-
as CBO estimated that TARP would cost $350               ers, make the sacrifices necessary to fundamen-
billion or more; CBO’s December 2011 estimate            tally restructure their businesses and commit to
is $34 billion, which assumes that $13 billion           tough-minded plans to return to viability.
will be spent through the housing programs. The
Administration now estimates the cost of the                The President’s decision to save GM and Chrys-
program will be $68 billion, assuming that the           ler was about more than those two companies. It
entire $45.6 billion set aside for housing initiatives   was about standing behind the countless work-
is utilized. In short, the price of stabilizing our      ers, families, communities, and businesses—large
THE BUDGET FOR FISCAL YEAR 2013                                                                        13

and small—that depend on the automotive indus-       for their families: find a good job, afford a home,
try. The success of this policy has been dramatic.   send their children to good schools, receive high-
Both companies restructured and emerged from         quality and affordable health care, and enjoy a
bankruptcy, and since then, the auto industry has    secure retirement in their later years. Americans’
created more than 100,000 new jobs, and Ameri-       drive and ingenuity lie at the heart of this promise
can automakers are in the midst of their stron-      and a growing economy makes it possible to real-
gest period of job growth in more than a decade.     ize these aspirations. Also critical are rules of the
American workers are back at the assembly line       road laid down to make our markets and free soci-
manufacturing high-quality, fuel-efficient, Ameri-   ety work, and remove barriers so that no one has
can-made cars, capable of competing with manu-       an unfair advantage and everyone can have a fair
facturers from around the world. In fact, General    shot to go as far as their dreams and talents can
Motors is now once again the world’s number one      take them. To that end, we have a responsibility
automaker. The impact of this resurgence goes        to one another as neighbors and as Americans to
beyond directly making cars and car parts, and       make sure that the basic protections are in place
affects the entire supply chain of goods and ser-    to enable families and businesses to thrive. These
vices that contribute to the world’s largest man-    include keeping our air and water healthy for our
ufacturing activity. Companies that make steel,      children, providing fairness in the workplace and
tires, glass, aluminum products, machinery, and      supporting those looking for work, ensuring that
after-market products all rely on the continued      products are safe and are represented honestly,
success of the U.S. auto industry. Indeed, the re-   and protecting Social Security and Medicare to
surgence of the American auto industry has been      provide for citizens in life’s later years.
at the heart of a quiet improvement in the overall
manufacturing sector—a key component of con-            To add to this list, the Administration has un-
structing an economy that is built to last and can   dertaken two historic initiatives—health insur-
create good jobs for years to come. Since Decem-     ance and Wall Street reform—that will hold some
ber 2009, the United States has added 334,000        of the largest companies in the country account-
manufacturing jobs, the first time the manufac-      able and help give all Americans the security they
turing sector has had sustained job growth since     need to ensure that an illness or ill-conceived
1998.                                                financial decision made by a firm hundreds of
                                                     miles away will not bankrupt them or prevent
   For taxpayers this means that the assistance      them from providing for their family. Over the
extended to these companies is paying off. In May    past year, the Administration has worked dili-
2011, Chrysler repaid its outstanding loans to the   gently to implement these new reforms, and to
U.S. Treasury—a full six years before their sched-   protect them from efforts to undermine and de-
uled maturity. Chrysler was able to achieve this     fund them. In the appropriations negotiations
milestone by accessing the debt markets and rais-    both at the beginning and end of 2011, the Ad-
ing capital on more favorable terms than the U.S.    ministration insisted on having the necessary
Government loans—another sign of its emerging        funding to continue to implement health insur-
strength as a private company. With that repay-      ance and Wall Street reform, and stopped efforts
ment, Chrysler had returned $11.1 billion to the     to use policy riders to undermine both of these
U.S. Government, which represents nearly 90          important initiatives, and their crucial protec-
percent of the Federal support committed to the      tions for American consumers and families.

       sUpporting and protecting                     Health Insurance Reform
         Middle-class faMilies
                                                       The President signed into law the Patient
 The promise of America is that with hard work,      Protection and Affordable Care Act (ACA) on
Americans can provide a solid, middle-class life     March 23, 2010, enacting comprehensive health
14                                                                 BUILDING A STRONG ECONOMY

insurance reforms that will hold insurance com-           More reforms also are taking effect. To ensure
panies more accountable, lower health care costs,      that dollars are going to patient care, the ACA
guarantee more health care choices, and enhance        requires insurance companies to spend at least
the quality of health care for all Americans. The      80 or 85 percent, depending on their market, of
ACA gives Americans the stability and security         premium dollars on medical care and quality
they need by ending many discriminatory and            improvements, instead of administrative costs
abusive insurance industry practices; expand-          and profits. If they fail to meet these standards,
ing coverage to more than 30 million Americans         insurance companies are required to provide a
who lack insurance; cutting waste and reforming        rebate to their customers. The first rebates will
health care delivery so that patients receive high-    be paid out later this year. Additionally, the ACA
er quality care; and doing it all without adding a     brings an unprecedented level of scrutiny and
dime to the deficit. In fact, the ACA will reduce      transparency to health insurance rate increases.
the deficit by more than $1 trillion over the next     Large premium increases proposed by health in-
two decades. Considering that rising health care       surance companies in the individual and small
costs are a major contributor to the deficit and       group markets will now be evaluated by experts
hinder the Nation’s overall competitiveness, the       to make sure they are based on reasonable cost
ACA puts in place much-needed deficit reduction.       assumptions and solid evidence, and insurance
                                                       companies have to publicly justify unreasonable
   Americans already are enjoying many of the          rate increases.
protections put in place by the ACA. For instance,
in the past, if a person became ill, insurance            Beyond curbing the most egregious practices
companies could rescind coverage and deny pay-         of the insurance industry, Americans have real-
ments for health services by retroactively finding     ized other benefits. Since ACA’s passage, small
an error or other technical mistake on their pre-      businesses have been claiming tax credits to help
viously accepted application; this is now illegal.     them provide insurance benefits to their workers.
Insurance companies are now prohibited from            Through 2013, this provision provides a credit
imposing lifetime dollar limits on benefits, such      worth up to 35 percent of employers’ contribu-
as hospital stays. Young adults under age 26 can       tions to employees’ health insurance; it rises to
now stay on their parents’ policies. And because       50 percent for coverage purchased through Af-
of the ACA, insurance companies can no longer          fordable Insurance Exchanges starting in 2014.
deny coverage to children under the age of 19 due      For those individuals who have been uninsured
to a pre-existing condition. And all new private-      for at least six months because of a pre-existing
market health insurance plans now must cover           condition, there is now a Pre-Existing Condition
critical preventive care services such as mam-         Insurance Plan to provide them with affordable,
mograms and colonoscopies without charging a           comprehensive coverage options. This program
deductible, copay, or coinsurance.                     serves as a bridge to 2014, when all discrimina-
                                                       tion against pre-existing conditions will be pro-
  Also, two important additions to coverage from       hibited. Similarly, the Early Retiree Reinsurance
the ACA for seniors went into effect. First, eligi-    Program provides temporary assistance to em-
ble Medicare beneficiaries are paying less for pre-    ployers who had been struggling to maintain cov-
scription drugs that are purchased in the Part D       erage for older workers who retired, but are not
coverage gap starting with a 50 percent discount       yet eligible for Medicare.
on covered brand-name prescription drugs in
2011; coverage will increase each year until the          In addition, numerous ACA reforms aimed at
coverage gap is closed in 2020. Second, Medicare       improving quality, efficiency, and coordination
beneficiaries are now eligible for certain free pre-   of care will take effect over the next year. Hos-
ventive services, such as annual wellness visits       pital Value-Based Purchasing and the Hospital
and recommended cancer screenings.                     Readmissions Reduction Programs will both tie
                                                       Medicare payments to hospitals to achievement
THE BUDGET FOR FISCAL YEAR 2013                                                                        15

of indicators of high-quality care. The Medi-          meant to give the financial system free license
care Shared Savings Program will be launched           to take irresponsible and reckless risks of such
nationwide, creating new opportunities for pa-         a size that they can harm our economy and leave
tient-centered, integrated care for Medicare bene-     taxpayers with the bill.
ficiaries. Further, the Administration is launching
several initiatives to improve care for individuals       The recent recession was not just the result of
eligible for both Medicare and Medicaid, includ-       a turn in the business cycle. Rather, it was the
ing developing and testing new models designed         result of a perfect storm of excessive risk-taking,
to incentivize States to create efficiencies through   inadequate disclosure, non-existent or myopic
integration of care and improved care coordina-        oversight, individuals and firms who chose to le-
tion. And the ACA provided significant new tools       verage themselves beyond their means, and in
and resources to crack down on waste and fraud         some cases outright deceptive lending practices
in health care.                                        that led too many Americans to take on debt they
                                                       could not afford. In sum, it was an abdication of
   Finally, the Administration is committed to         responsibility from across many actors in the
implementing the ACA swiftly, efficiently, and ef-     financial system.
fectively, and will continue to work with the Con-
gress to ensure that the resources are available to       To prevent this from happening again, the
do just that. The need for resources is especially     Administration set out to craft a financial reform
critical for establishing Affordable Insurance Ex-     package that filled the gaps in oversight, trans-
changes, which will help ensure that every Amer-       parency, and restraint; put a check on predatory
ican can access high-quality, affordable health        and abusive lending; and restored accountabil-
insurance coverage beginning in 2014. These            ity to the system—especially for those who had
competitive marketplaces will provide millions         operated outside the regulatory framework. The
of Americans and small businesses with “one-           Administration’s goal was to restore our financial
stop shopping” for affordable coverage in every        system to its core mission: providing a safe and
State. Since passage of the ACA, the Department        productive venue for private saving, helping en-
of Health and Human Services (HHS) has pro-            trepreneurs and businesses with the best ideas
vided grants to nearly all States to plan for and      to create value and jobs, and enabling families to
establish these State Exchanges.                       buy homes, finance college for their children, and
                                                       secure a dignified retirement.

Wall Street Reform                                        On July 21, 2010, after a long and difficult
                                                       fight on Capitol Hill, the President signed into
  Curbing the abuses in the health insurance in-       law the most far-reaching Wall Street reforms
dustry and beginning to bring down rising health       since the Great Depression—the Dodd-Frank
care costs were long overdue steps toward ad-          Wall Street Reform and Consumer Protection Act
dressing critical problems that affect Americans       (Wall Street Reform). This law takes the neces-
every day. The financial and economic crisis of        sary steps to create a more stable and responsible
2008 also made it clear that the rules governing       financial system. The Act requires banks to hold
our financial system needed revision to provide        more capital so that when they make a bad bet
a more stable foundation for the economy and to        they pay for it, not taxpayers. It also prevents
protect consumers, businesses, and families.           financial companies, like AIG, from posing such
                                                       a risk to our economy that we have no choice
   The American free market system is the most         but for taxpayers to bail them out. The Act does
powerful engine of economic growth and job cre-        this by creating an orderly liquidation process
ation the world has known, and when it works, it       for large financial firms that fail, and by requir-
helps ensure that the American middle class is         ing the largest and most systemically important
strong and secure. But the free market was never       financial firms to write “living wills” that detail
16                                                                 BUILDING A STRONG ECONOMY

how, if they fail, they will be wound down in a       deposits—are prohibited from making risky trad-
manner that does not leave taxpayers vulnerable.      ing bets for their own accounts and face restric-
The Act also brings transparency to the $600 tril-    tions in investing in or sponsoring hedge funds
lion derivatives market and prohibits banks from      or private equity funds. Regulators have also pro-
making risky bets with their customers’ deposits.     posed new rules for higher capital standards to
Finally, the Act holds CEOs accountable by tak-       buffer against risk in the financial system. The
ing back bonuses and compensation from failing        FDIC has finalized new rules to resolve a failing
CEOs, giving shareholders a voice on CEO pay,         financial firm without threatening the financial
and protecting whistleblowers who speak out           system or costing taxpayers.
about wrong-doing on Wall Street.
                                                         To ensure that agencies and departments
   In addition, Wall Street Reform puts in place      have the resources they need to implement Wall
sweeping reforms to protect American consum-          Street Reform, the Administration fought for and
ers. The Act created the Consumer Financial           secured adequate funding levels for 2012, and
Protection Bureau (CFPB), an agency exclusively       continues this commitment in the 2013 Budget.
devoted to protecting consumers, in part by giv-      And to ensure that consumers are protected, the
ing them the tools to make their own choices and      President appointed Richard Cordray to head the
find the most suitable financial products, even       CFPB. Without a Director, the CFPB could not
when a provider may have incentives to hide           fully supervise non-bank financial institutions
true costs. The CFPB is empowered to set high         such as independent payday lenders, non-bank
and uniform standards across the market; focus        mortgage lenders, non-bank mortgage servicers,
on improving financial literacy for all Americans;    debt collectors, credit reporting agencies, and
and help to end profits based on misleading sales     private student lenders. This meant that tens of
pitches and hidden traps, forcing banks and non-      millions of Americans were left unprotected from
bank financial institutions to compete vigorously     falling prey to many of the harmful practices that
for consumers on the basis of price and quality.      contributed to the worst financial crisis since the
It will help crack down on abusive practices in       Great Depression.
the mortgage industry, make financial contracts
simpler, and end many of the hidden fees so that               JUMpstarting econoMic
families know what they are signing when they                  groWth and Job creation
buy a home. It also ensures that students who
take out college loans will be provided clear and        By almost any measure, the economy this past
concise information about their obligations. It re-   year was stronger than it was in 2009 at the
inforces the Credit Card Accountability, Respon-      start of the Administration. However, too many
sibility, and Disclosure Act passed in 2009 that      Americans are still out of work, and our economy
bans unfair rate hikes, and ensures that banks        is not yet operating at its full potential. Part of
cannot charge unwitting consumers overdraft           this is due to the destructive nature of the reces-
fees when they sign up for a checking account.        sion that we went through, and part is due to a
In total, these reforms put in place the strongest    confluence of external world events that shook
consumer financial protections in history.            global markets as described earlier in this Chap-
                                                      ter. The effect of these events on economic per-
   Over the course of the last year, the Admin-       formance in the latter part of calendar year 2011
istration and independent regulators have been        and, in turn, on the lives of millions of Americans
working to implement Wall Street Reform to            in search of a good job and economic security led
achieve these goals. Regulators issued proposed       the Administration to propose the American Jobs
regulations to implement the Volcker Rule to          Act in September 2011.
make sure that banks benefitting from Govern-
ment protections—such as Federal Deposit Insur-
ance Corporation (FDIC) insurance on customer
THE BUDGET FOR FISCAL YEAR 2013                                                                         17

American Jobs Act                                      viding a typical worker with an additional $40 in
                                                       each paycheck. The full-year extension of UI ben-
   The purpose of the American Jobs Act (AJA)          efits for Americans pounding the pavement look-
was simple: put more people back to work and put       ing for work would save 5 million individuals from
more money in the pockets of working Americans.        exhausting benefits this year, and would help to
Independent economists estimated that the Act          create nearly 500,000 jobs as these benefits are
would have added up to nearly 2 million jobs           spent quickly in the economy. Finally, prevent-
in 2012. The AJA included: tax cuts to help            ing a deep cut in Medicare physician payments is
America’s small businesses hire and grow; tax          critical to seniors’ access to care.
credits to spur hiring; investments in infrastruc-
ture improvements; new pathways back to work             We need to finish the job because there are still
for Americans looking for jobs, including the most     too many Americans who want to work, but can-
significant reforms to the Nation’s unemploy-          not find jobs. That is why the President is still
ment system in 40 years to help those without          calling for efforts to spur near-term economic
jobs transition to the workplace; and tax cuts to      growth and job creation. This includes many of
put more money in the pockets of every American        the planks in the AJA that were not enacted, as
worker and family. Moreover, the AJA would not         well as measures not included in that legislation.
have added to the deficit. It included specific off-   Some of these job-creating proposals include:
sets that would, in combination, more than fully
pay for its cost.                                        •	 An upfront investment of $50 billion from
                                                            the surface transportation reauthorization
   While the AJA was comprised of the kinds of              bill for roads, rails, and runways to create
ideas that had been embraced by Democrats and               thousands of quality jobs in the short term.
Republicans in the past, congressional intran-
sigence prevented the AJA from becoming law.             •	 Aid to States and localities to retain and hire
Nevertheless, the President kept fighting for               teachers and first responders.
measures to jumpstart economic growth and job
creation. In November, the President won enact-          •	 Extending UI benefits and undertaking
ment of one plank of the AJA: a new tax credit for          major reforms to help the long-term unem-
America’s veterans, which provides up to $5,600             ployed find work and spur the creation of
for hiring a veteran who is long-term unemployed            job opportunities for hundreds of thousands
and $9,600 for businesses that hire a veteran               of the most-vulnerable Americans—low-in-
with a service-related disability.                          come youth and adults. This includes reforms
                                                            that require those receiving emergency Fed-
   And, in the waning days of the year, the                 eral benefits to participate in Reemployment
President signed into law a short-term extension            and Eligibility Assessments and be provided
of the decrease in the payroll tax, an increase in          Reemployment Services, which have been
UI benefits, and the prevention of a 27 percent             proven to help put people back to work; that
cut to Medicare payments to physicians that was             build on and improve innovative State pro-
set to take effect at the end of the calendar year.         grams where those who have been displaced
To be clear, the President preferred a year-long            take temporary, voluntary work or pursue
extension of these critical growth measures, and            on-the-job training; and that expand pro-
expects the Congress to continue the short-term             grams to allow those receiving UI to start
payroll tax and UI extension they approved in               their own businesses.
December for the rest of 2012, and avert the im-
pending reduction in physician payments. The             •	 The Better Buildings Initiative that seeks to
full-year extension of the payroll tax cut for 2012         make non-residential buildings 20 percent
would help 160 million American workers, pro-               more energy efficient over the next decade
18                                                              BUILDING A STRONG ECONOMY

     by catalyzing private-sector investment            sible borrowers with little or no equity in
     through a series of incentives to upgrade          their homes take advantage of today’s low
     offices, stores, universities, hospitals, and      mortgage rates.
     commercial buildings.
                                                      •	 Expanding Jobs for Veterans. On October
  •	 Funds to modernize at least 35,000 schools          25, HHS announced an initiative to chal-
     to create jobs now and high-quality schools         lenge Community Health Centers to hire
     for the future.                                     8,000 veterans—approximately one veteran
                                                         per health center site—over the next three
  •	 Reauthorization of Clean Energy Manufac-            years. The Administration also announced
     turing Tax Credits to spur the creation of          that it would work with health practitioner
     manufacturing jobs in the advanced energy           training programs to expand opportunities
     technology sector.                                  for returning service members with medical
                                                         training to become physician assistants.
  •	 A new HomeStar program, which would en-
     courage Americans to invest in energy and        •	 Creating New Opportunities for Improving
     cost-saving home improvements, reducing             College Affordability. On October 26, the
     families’ energy bills over time and creat-         President announced “Pay as you Earn” to
     ing jobs for those who undertake and make           enable student loan borrowers to cap their
     these renovations.                                  student loan repayments at 10 percent of
                                                         discretionary income beginning in fall 2012.
  •	 Continuing to allow businesses to write-off
     the full amount of new investments next          •	 Helping Small Businesses Create Jobs. On
     year.                                               October 28, the White House issued two
                                                         Presidential Memoranda to help small busi-
  •	 Project Rebuild, a series of policies to help       nesses create jobs. One memorandum di-
     connect Americans looking for work in dis-          rected agencies to take steps to speed up the
     tressed communities with the work needed            transfer of Federal research from the labora-
     to repurpose residential and commercial             tory to the marketplace. The other directed
     properties.                                         the creation of BusinessUSA, an online plat-
                                                         form where businesses can access informa-
                                                         tion about Federal programs that support
We Can’t Wait: Executive Actions to                      small businesses and exports.
Boost the Economy
                                                      •	 Preventing Drug Shortages. On October 31,
   Recognizing the need for action in the face of        the President signed an Executive Order di-
congressional gridlock, the President believed           recting the Food and Drug Administration
that the American people could not wait for the          and the Department of Justice to take action
Congress to act to spur economic growth and job          to help further reduce and prevent shortag-
creation. That is why, throughout the fall of 2011,      es of critical drugs, protect consumers, and
the President waged a “We Can’t Wait” campaign,          prevent price gouging.
a series of executive actions that he and his Cabi-
net took to help families hurt by the sluggish eco-   •	 Accelerating Transportation Projects. On
nomic growth, boost economic activity, and spur          November 2, the President announced steps
job creation:                                            the Administration is taking to improve and
                                                         expedite the process of reviewing and ap-
  •	 Housing Refinancing. On October 24, the             proving transportation projects. On Decem-
     President announced steps to help respon-           ber 15, as part of this effort, the Department
THE BUDGET FOR FISCAL YEAR 2013                                                                     19

   of Transportation awarded $511 million in          •	 Raising Fuel Economy Standards. On No-
   transportation grants as part of the Depart-          vember 16, the Department of Transpor-
   ment’s popular Transportation Investment              tation and the Environmental Protection
   Generating Economic Recovery (TIGER)                  Agency formally unveiled their joint proposal
   program, months ahead of schedule.                    to set stronger fuel economy and greenhouse
                                                         gas pollution standards for Model Year 2017-
 •	 Supporting Jobs for Veterans. On November            2025 passenger cars and light duty trucks.
    7, the Administration announced three exec-          This initiative will have net benefits of be-
    utive actions that will provide new resources        tween $310 billion and $420 billion in fuel
    for veterans to translate military experience        savings, slash oil consumption by 4 billion
    to the private job market, give veterans ad-         barrels, and reduce greenhouse gas emis-
    ditional career development support, and             sions by 2 billion metric tons over the life-
    better identify firms looking to hire veterans.      times of the vehicles sold those years. When
                                                         combined with other steps we have taken to
 •	 Reforming Head Start. On November 8, the             set standards for vehicles, this proposal will
    President announced important steps to im-           save Americans approximately $1.7 trillion
    prove the quality of services and accountabil-       at the pump, reduce America’s dependence
    ity at Head Start centers across the country.        on oil by an estimated 12 billion barrels, and
                                                         reduce greenhouse gas emissions by 6 billion
 •	 Cutting Waste. On November 9, the President          metric tons over the life of the programs.
    signed an Executive Order that will cut waste
    and promote more efficient spending across        •	 Modernizing Government Records. On No-
    the Federal Government. Overall spending             vember 28, the Administration issued a
    in the areas covered by the Executive Order          Presidential Memorandum that directed
    will be reduced by 20 percent, saving billions.      agencies to move to a digital-based records
                                                         keeping system. This action will save tax-
 •	 Creating Health Care Jobs. On November 14,           payer dollars, promote accountability, and
    HHS announced a $1 billion Health Care In-           increase government transparency. This is
    novation Challenge, which will award grants          one of the policy actions that open govern-
    to applicants who will implement the most            ment advocates have sought for years.
    compelling new ideas to deliver better care
    and lower costs to people enrolled in Medi-       •	 Expanding Health Information Technology
    care, Medicaid, and the Children’s Health            (IT). On November 30, HHS announced at
    Insurance Program. This competition pri-             an event in Ohio that the number of physi-
    oritizes projects that deploy the health care        cians adopting electronic medical records
    workforce in innovative ways.                        has doubled since 2009, and set forth steps
                                                         the agency is taking to make it easier for
 •	 Reducing Improper Payments. On November              doctors and other health professionals to re-
    15, OMB and the Vice President announced             ceive incentive payments for adopting and
    that the Administration cut improper pay-            meaningfully using health IT.
    ments by nearly $18 billion in 2011, and that
    we are on track to meet the President’s goal      •	 Improving Energy Efficiency Through the
    of cutting improper payments by $50 billion          “Better Building Initiative.” On December
    by the end of 2012. We also announced new            2, with President Clinton, the President an-
    actions to help further reduce Medicare and          nounced nearly $4 billion in combined Fed-
    Medicaid waste, fraud, and abuse as well as          eral and private sector energy-efficiency up-
    a directive to agencies to step up their over-       grades to buildings over the next two years.
    sight of contractors and grant recipients.
20                                                                 BUILDING A STRONG ECONOMY

  •	 Expanding Advanced Biofuels. In Decem-            over 12 million homeowners to refinance since
     ber, the Defense Logistics Agency signed a        April 2009; the homebuyer tax credit, which
     contract to purchase 450,000 gallons of ad-       helped millions of Americans to purchase homes,
     vanced drop-in biofuel, the single largest        bolstering macroeconomic demand; the low-
     purchase of biofuel in Government history.        income housing tax credit and housing finance
                                                       agency programs to support affordable housing;
  •	 Launching Small Business Innovation Fund.         and the Home Affordable Modification Program
     On December 8, in conjunction with the first      (HAMP), which provides eligible homeowners the
     board meeting of the Startup America Part-        opportunity to significantly reduce their monthly
     nership, the Small Business Administration        mortgage payments, remain in their homes, and
     announced that it is moving forward with          avoid foreclosures.
     launching a $1 billion Early Stage Innova-
     tion Fund that will provide matching capi-           Although initially held back by implementa-
     tal to small business investment companies.       tion challenges and poor performance on the
     The Administration also announced com-            part of mortgage servicers, HAMP has provided
     mitments from more than 50 private-sector         910,000 borrowers with a permanent modifica-
     partners to deliver over $1 billion in value to   tion and, equally importantly, established a tem-
     100,000 startups over the next three years.       plate for the private market to provide more ef-
                                                       fective modifications for struggling homeowners.
  •	 Extending Minimum Wage and Overtime               In total, since the Administration’s housing pro-
     Protections. On December 15, the President        grams took effect in 2009, there have been more
     announced new proposed rules to provide           than twice as many public and private mortgage
     Federal minimum wage and overtime pro-            modification offers made than foreclosures com-
     tections for nearly two million workers who       pleted. The Administration has worked to expand
     provide in-home care services for the elderly     and enhance the program—including introducing
     and infirm.                                       related programs for second lien modifications
                                                       and short sales, and has increased servicer over-
  If the Congress continues to block efforts to        sight and public reporting on servicer-specific
pass legislation that can spur economic growth         performance.
and job creation, the President will undertake
whatever executive actions he can to make sure            While there are signs that the broader hous-
that our economy continues its recovery.               ing market is beginning to stabilize, too many
                                                       Americans are still paying mortgage interest
                                                       rates far above current market rates because
Rejuvenating the Housing Market                        home price declines made them ineligible for re-
                                                       financing. To address this issue, the President
   As the financial crisis and recession was deep-     announced last September that his economic
ening in 2009, the Administration took immedi-         team would work with Federal housing agen-
ate steps to help thousands of responsible home-       cies and the Government-Sponsored Enterprises
owners who were facing foreclosure or were at          (GSEs) Fannie Mae and Freddie Mac to expand
risk of losing their homes. This began with the        the Home Affordable Refinance Program (HARP),
Administration’s effort to establish a broad set       and in October specific changes were announced
of programs designed to stabilize the housing          that will remove many of the barriers preventing
market and keep millions of Americans in their         GSE borrowers who have remained current on
homes. The initiative included Treasury’s mort-        their mortgages from taking advantage of today’s
gage-backed securities purchase program, which         historically low mortgage rates.
along with mortgage-backed securities purchases
by the Federal Reserve, has helped to keep mort-          While this is an important step, the Admin-
gage interest rates at historic lows and allowed       istration believes that more relief is needed.
THE BUDGET FOR FISCAL YEAR 2013                                                                        21

Therefore, the Administration is calling on the         •	 Signed Into Law Free Trade Agreements with
Congress to take additional steps so virtually             Colombia, Panama, and Korea. To help meet
every family that has a standard mortgage and              the President’s export goal, the Administra-
has been paying its bills on time will have the op-        tion completed negotiations for free trade
portunity to refinance their mortgage at today’s           agreements (FTAs) with Colombia, Panama,
historically low rates. Specifically, this would be        and Korea. The three trade agreements were
done by fully streamlining HARP to increase ac-            passed in quick succession in the fall of 2011
cess and lower cost for borrowers and, more sig-           and signed into law by the President, mark-
nificantly, to provide those responsible Americans         ing the biggest step forward in American
who happen not to have a loan guaranteed by the            trade liberalization in nearly two decades.
GSEs with access to a comparable streamlined               These agreements are fair and were passed
refinance program through the Federal Hous-                together with a renewed and strengthened
ing Administration. Helping families refinance             trade adjustment assistance program for
will help homeowners get into more sustainable             workers displaced by international trade.
loans, save each family on average $3,000, enable          In particular, the Korea-United States FTA
many people to stay in their homes, and give a             is expected to boost annual U.S. goods ex-
jolt to local economies.                                   ports to Korea by as much as $11 billion and
                                                           support more than 70,000 American jobs.

Opening Global Markets                                  •	 Promoted Business Investment in the U.S.,
                                                           Including Foreign Direct Investment (FDI).
   The emergence of a global marketplace that              The Obama Administration has taken un-
includes the growing economies of China, India,            precedented steps to facilitate and promote
Brazil, and other developing countries creates an          business investment in the United States.
opportunity for America to export our goods and            This includes establishing SelectUSA, a
services to new customers. With 95 percent of the          “one-stop shop” based in the Department of
world’s customers as well as the globe’s fastest-          Commerce that facilitates investment in the
growing markets beyond our borders, we must                United States from both foreign and domes-
compete aggressively to spur economic growth               tic investors. This effort represents the first
and job creation. That is why the President                systematic Federal Government initiative to
launched his National Export Initiative to mar-            promote and facilitate business investment,
shal the full resources of the Federal Government          a role that had historically been left to the
behind America’s businesses, especially small-             States. In addition to increasing the level of
and medium-sized enterprises, to best help them            FDI, SelectUSA also seeks to diversify our
sell their goods, services, and ideas to the rest          FDI beyond those countries that have his-
of the world and to reach the President’s goal of          torically been our largest trading partners.
doubling U.S. exports in five years’ time (by the          Within the United States, SelectUSA works
end of 2014).                                              across the Federal Government and partners
                                                           with State and local economic development
  The Administration is currently on pace to               organizations to enable a coordinated ap-
meet this target: through October 2011, exports            proach to compete for business investment,
of goods and services over the preceding 12                an effort which the President is proposing to
months totaled over $2 trillion, 32 percent above          significantly expand in the 2013 Budget.
2009 levels. Current GDP forecasts suggest that
the ratio of exports to GDP will hit 14 percent in      This year, the Administration will continue to
2011, which would also be an historical record.       vigorously enforce international and domestic
To support international trade and the jobs that      trade laws and look for opportunities to level the
accompany it, the Administration has:                 playing field for American workers, businesses,
22                                                                BUILDING A STRONG ECONOMY

ranchers, and farmers; pursue increased access       a low-cost, high-impact regulatory tool. From
to several foreign markets through the ground-       automobile safety to energy efficiency and credit
breaking Trans-Pacific Partnership; implement        cards, this approach has been fruitful. In fact, in
the three FTAs passed in 2011; work with the         the Administration’s first two years, the net ben-
Congress to pass legislation allowing the United     efits of regulation were estimated to exceed $35
States to benefit from Russia’s accession to the     billion—over 10 times the amount in the first two
World Trade Organization; and promote tourism        years of the George W. Bush Administration, and
and travel to the United States from the world’s     over three times the amount in the correspond-
fastest growing economies by expanding visa          ing period in the Clinton Administration. In fact,
processing in countries such as Brazil and China.    fewer regulations were issued by Executive Agen-
                                                     cies in the first three years of this Administration
                                                     than in the first three years of the previous
Pursuing Sensible Regulation                         Administration.

   Administration is firmly committed to a regu-        To improve the regulatory process, the
latory strategy that promotes continued economic     President issued a new Executive Order calling
growth and job creation, while protecting the        for attention to the best available evidence, care-
safety and health of all Americans. Smart, cost-     ful consideration of costs and benefits, greater
effective regulations, crafted with input from       coordination among agencies, and selection of
stakeholders inside and outside of Government,       flexible and least burdensome alternatives, and
can save lives and prevent harm while promoting      has called on independent Federal regulators to
growth and innovation. As the economy continues      follow suit in their rulemakings. The Executive
to recover and create new jobs, it is particularly   Order also called for an unprecedented Govern-
critical for the Nation’s regulatory strategy to     ment-wide review of existing rules. The review
enable American businesses to grow and innovate.     produced over 500 reform proposals across all
                                                     Executive agencies. Already, we are on track to
   That is why the Administration carefully          save more than $10 billion dollars in just the near
weighs the costs and benefits of rules—not by        term, with much more savings to come.
reducing difficult questions to problems of arith-
metic, but by carefully weighing economic effects      In the coming year, agencies will continue to
and also by taking into account qualitative fac-     pursue the regulatory reforms identified in the
tors, including fairness and human dignity. The      retrospective review process, producing billions
Administration uses objective data to assess the     more in savings by simplifying rules, eliminating
impact of rules and to assess alternatives. More-    redundancies, and identifying more cost-effective
over, the Administration looks for areas where       ways of doing things.
it can promote transparency and disclosure as

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