Obama vows to halve budget deficit by end of first term

Business Materials 24 February 2009 04:27 (UTC +04:00)

President Barack Obama promised Monday to halve the ballooning US federal budget deficit by the end of his four-year term, despite having already authorized record spending on a package to jolt the economy out of a deepening recession.

Obama, who took office in January, inherited a 2008 budget deficit of 1.3 trillion dollars. That figure could top 2 trillion dollars - more than 10 per cent of US gross domestic product - in 2009 as his administration works to halt a disastrous economic slide.

While such record deficit spending was necessary in the "short- term," Obama said the world's largest economy "cannot and will not sustain deficits like these without end."

"I refuse to leave our children with a debt that they cannot repay," he said in a so-called Fiscal Responsibility Summit at the White House, which brought together politicians, economists and business leaders.

The new pledge comes after Obama last week signed unprecedented 787-billion-dollar economic stimulus legislation to help jump-start the flagging US economy. That followed a separate 700-billion-dollar financial bailout approved in October to shore up struggling US banks.

The massive spending spree has drawn the ire of many conservatives, who argue that Obama's administration is needlessly saddling future generations with unprecedented debts. Obama hopes to assuage some of their concerns this week with a series of events focusing on his longer-term efforts to cut government spending.

"I have no interest in making government bigger for the sake of it," Obama said after the fiscal summit, addressing his conservative critics.

He will unveil details of his 2010 budget and beyond in a traditional annual speech Tuesday night to a joint session of Congress and in a written outline to legislators Thursday.

The administration has promised to cut wasteful or ineffective government programmes and to roll back for the highest earners tax cuts that were enacted under former president George W Bush.

Fulfilling the new budget pledge will also require Obama to rein in spiralling health-care and pension costs, which are crucial to any long-term solution. Reforms of both have frustrated many past presidents trying to improve long-term government solvency.

The summit Monday brought together a bipartisan group of policy experts and politicians - including his 2008 presidential rival John McCain and other Republican lawmakers - to begin that conversation.

Obama urged states to spend the government's money wisely during a meeting with state governors earlier Monday at the White House. The president said he was relying on states to quickly implement the stimulus programmes to boost employment.

"We are addressing the greatest economic crisis we have seen in decades by investing unprecedented amounts of the American people's hard-earned money," Obama said. "And with that comes an unprecedented obligation to do so wisely, free from politics and personal agendas."

Vice President Joe Biden has been tasked with overseeing how the emergency money is spent, Obama said. The administration hopes the stimulus will save or create 3.5 million jobs over the next two years. More than 3.6 million jobs have been lost since the US went into recession in December 2007.

About 15 billion dollars from the 787-billion-dollar economic recovery package will be available to states as early as Wednesday to combat serious budget shortfalls in health care, Obama said. Hundreds of billions of dollars will begin flowing over the next several months.

Most of the country's 50 states have clamoured for federal aid to plug budget holes totalling about 350 billion dollars nationwide.

But some Republican governors have strongly opposed Obama's rescue package and are refusing to accept a portion of the money. They worry that a temporary extension of unemployment benefits, for example, could force them to increase taxes once the federal cash injection runs out.

Unlike the national government, US states are required by law to balance their budgets, forcing many to cut government benefits just as a deepening recession has increased demand for those services, reported dpa.