Obama Vows Action with US Deficit Topping $1 Trillion
WASHINGTON ~ The US budget deficit will top a startling US$1 trillion this year, according to new projections this week, threatening to crimp president-elect Barack Obama’s economic recovery plans.
Appointing a new watchdog to slash wasteful spending, Obama said the forecast by the Congressional Budget Office (CBO) underlined the need to kick-start the economy now and overhaul government finances in the long haul.
“My own economic and budget team projects that, unless we take decisive action, even after our economy pulls out of its slide, trillion-dollar deficits will be a reality for years to come,” he told reporters.
Ahead of his inauguration on January 20, Obama said “our problem is not just a deficit of dollars – it’s a deficit of accountability, a deficit of trust,” vowing a root-and-branch review to cut waste from the budget.
That review will be conducted by management consultant and former Treasury official Nancy Killefer. Her appointment as the new administration’s “chief performance officer,” Obama said, “is among the most important I will make.”
In a new report, the non-partisan CBO forecast the government deficit of the world’s largest economy would reach a record $1.2 trillion in the current fiscal year ending in September.
That is more than double the last fiscal year’s $438 billion and amounts to a whopping 8.3 percent of gross domestic product – its highest level since World War II.
And the sea of red ink does not take account of Obama’s plans for a hefty dose of stimulus spending, which Democrats in Congress hope to adopt by mid-February.
Obama aides say the recession-fighting package will likely total $775 billion over two years. Some economists say it could go as high as $1.2 trillion.
“We expect that it will be on the high end of our estimates but will not be as high as some economists have recommended, because of the constraint and concerns we have about the existing deficit,” Obama said.
The CBO said the budget was under worsening strain from slumping tax revenues allied to higher social spending and a $700-billion bailout for Wall Street.
The year-old recession will “last well into 2009,” it said, which would make it the longest US contraction since the war.
Obama pledged to rein in the government’s biggest long-term commitments – “entitlement spending” such as Social Security retirement benefits and Medicare health insurance for seniors.
But he did not go into details, as Republicans in Congress complained of opacity and open-ended promises in the stimulus package, while querying how much of the huge sums will actually trigger growth.
Senate Republican leader Mitch McConnell said the CBO evaluation was “a stunning and sobering reminder that Congress must strengthen its efforts to be good stewards of the taxpayers’ money.”
“Though we agree that Congress must carefully pursue ways to strengthen our economy, this report should cause us to make certain that any dollar spent to stimulate the economy will in fact achieve that outcome and produce jobs and opportunity,” he said.
But Democrats accuse the Republicans under President George W. Bush of destroying the surpluses bequeathed by Bill Clinton through profligate tax cuts and war spending in Iraq.
“President-elect Obama is being handed an absolute fiscal disaster,” said Senate budget committee chairman Kent Conrad.
“And as we address our economy, it is vital that we simultaneously take steps to put our budget back on a sound long-term fiscal path,” he said.
House of Representatives Speaker Nancy Pelosi said Republican complaints about the deficit impact of Obama’s stimulus package ignored the depths of the nation’s economic crisis.
The bill was “fiscally responsible” because at least 40 percent of the outlays would be recouped through increased tax revenues, she said in a meeting with Democratic lawmakers.
“Equally important, this legislation will save or create three million jobs and help increase incomes for American workers,” Pelosi said.Filed under: Our World