President Barack Obama announces economic initiatives for struggling middle class families, Monday, Jan. 25, 2010. Obama to propose spending freeze

President Obama plans to announce a three-year freeze on discretionary, “non-security” spending in the lead-up to Wednesday's State of the Union address, Hill Democratic sources familiar with the plan tell POLITICO.

The move, intended to blunt the populist backlash against Obama's $787 billion stimulus and an era of trillion-dollar deficits — and to quell Democratic anxiety over last Tuesday's Massachusetts Senate election — is projected to save $250 billion, the Democrats said.


The freeze would not apply to defense or foreign aid or spending on intelligence, homeland security or veterans.

News of the proposal came as the Congressional Budget Office is slated to release new deficit estimates Tuesday morning, and when the Senate will also vote on a proposed bipartisan task force empowered to force votes after November’s elections on proposals to rein in the growing federal debt.

It’s been know for weeks that Obama was considering some type of freeze on 2011 domestic spending but the proposal now would go further by covering three years or the remainder of the president’s first term.

After healthy spending increases in 2009 and 2010, agencies will have some flexibility at first. One-time costs, like the 2010 Census, will also be coming down, and this could help pay for more money for NASA, for example.

But education and science investments could well be squeezed over the long term and this poses tough choices for Democrats at a time when the party wants to foster job creation.

Fiscal conservatives are likely to be pleased. Sen. Evan Bayh (D-Ind.), a fiscal hawk, told Bloomberg's Al Hunt last week that there was a “fighting chance” Obama would propose a freeze in most discretionary spending by the federal government as part of his address.

“The president can say in this State of the Union address, ‘I’m going to include in my budget a freeze on discretionary spending, I’m drawing a line in the sand, and I’m going to use my veto pen to enforce that,’” Bayh said in an interview on Bloomberg Television’s Political Capital with Al Hunt.

Michael Steel, a spokesman for House Minority Leader John Boehner (R-Ohio), was skeptical.

"Given Washington Democrats’ unprecedented spending binge, this is like announcing you’re going on a diet after winning a pie-eating contest," he wrote in an email to POLITICO.

The White House didn't respond to a request for comment.

On Monday, Obama unveiled a series of five proposals intended to help middle-class families, including a near-doubling of the Child and Dependent Care Tax Credit for families making under $85,000 a year, creating a system of automatic workplace IRA contributions, and expanding help for families with elderly relatives.