US Budget constraints limit Barack Obama's second-term agenda

President Barack Obama starts his second term in office facing unprecedented budget constraints that will challenge his ability to implement his economic vision.

Spending caps that Obama signed into law in 2011 will make it difficult to boost investment in education, scientific research, transportation and other areas that he says will help the country retool for heightened global competition and rapid technological change, budget experts say.

Because those caps won't keep pace with inflation and population growth, the government will effectively have 16 percent less to spend in these areas by the time Obama leaves office in 2017, according to White House estimates.

That could constrain college loans, preschool education, job training and other programs that Obama says will boost national competitiveness.

"Under the caps as they are currently constructed, we're going to see pretty significant diminishment of investment in all of those things," said Scott Lilly, who spent decades writing spending bills as a Democratic staffer in the House of Representatives.

Since taking office in 2009, Obama has tried to balance his belief in an active government with concerns that the nation's finances are on an unsustainable course.

Even as he has pushed through more than $1 trillion in spending increases and tax cuts to fight the deepest recession in 80 years, he has floated deficit-reduction plans that would trim costs over the medium term.

As part of a deal that allowed the government to avert a first-ever debt default in August 2011, Obama and his Republican adversaries agreed to spending limits that would slow government spending growth by $1 trillion over 10 years.

Those caps in the 2011 Budget Control Act do not apply to popular benefits like the Social Security retirement program and Medicare, the health plan for retirees. Obama and fellow Democrats have so far blocked Republican proposals to scale back these programs, which are projected to grow at the same rate as the economy for the next four years before expanding as aging "baby boomers" drive up costs.

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