Obama aims to cut deficit in half by ’13
This week is about the budget, as he issues his first, hosts a ‘fiscal responsibility summit.’
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Over the next several years, he says, the nation will be spending and borrowing vast sums of money, and by focusing concurrently on how to bring back balance, it sends a signal to both the political and financial communities that there’s an “end game, that there’s an exit strategy to this massive borrowing.”Skip to next paragraph
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This signal is also important for foreign lenders who are providing most of the capital for US deficit spending. “They will need to see at some point that there’s a viability plan, just like we demand from the auto companies,” says Mr. Bixby.
Monday’s summit is not intended to reach conclusions or launch initiatives, but to frame the debate. A bipartisan group of budget experts recommended Thursday that the summit be followed by creation of a bipartisan, independent commission that would craft a solution to America’s long-term fiscal problems. Based on the model of military base-closing commissions, the group would present recommendations to Congress for an up-or-down vote.
In terms of substance, the week’s highlight will come Thursday, with the unveiling of Obama’s first budget. Though it will be more an outline than a detailed blueprint, as is customary for a new president, enough will be there to provide a sense of the Obama administration’s direction. The full budget will be ready in April.
“One of the things that the president really has to do with the budget is to send a clear, credible signal that there is a long-term plan to save the economy and keep the federal budget from going over a cliff,” says William Galston, who served as domestic policy adviser in the Clinton White House.
Already, the Obama administration has signaled an end to what it calls the budgetary “gimmicks” of the Bush administration, such as keeping Iraq and Afghan war and disaster spending off budget.
No one doubts the numbers will be ugly. A paper released Thursday by two economists, Alan Auerbach of the University of California, Berkeley, and William Gale of the Brookings Institution, projects that in 2009, the federal deficit will be larger as a share of the economy than at any time since World War II.
Even under optimistic assumptions, they write, “the deficit is projected to average at least $1 trillion per year for the 10 years after 2009.”
It is within this gloomy context that Obama will address Congress, the nation, and the world Tuesday evening. In his weekly Internet address Saturday, the president provided a glimpse of what he is expected to say on Tuesday. He reviewed the elements of the just-signed stimulus package and the ways in which its effects will be felt. He also sought to demonstrate the interconnectedness of the economic crisis – how the banking and credit crisis links to housing and jobs.
And he stressed the importance of fiscal discipline, saying the government must do “all we can to get exploding deficits under control as our economy begins to recover.”
“In short, we cannot successfully address any of our problems without addressing them all,” he said.