US President Barack Obama wants to cut the federal deficit in half by the end of his first term, mostly by scaling back Iraq War spending, raising taxes on the wealthiest and streamlining government, an administration official said on Saturday as the president worked to finalize his first budget request.
Obama’s proposal for the 2010 fiscal year, which begins on Oct. 1, projects that the estimated US$1.3 trillion deficit he has inherited from former president George W. Bush will be halved to US$533 billion by 2013. That’s a difference of 9.2 percent of the overall economy now versus 3 percent in four years.
“We can’t generate sustained growth without getting our deficits under control,” Obama said in his weekly radio and Internet address that seemed to preview his intentions.
He said his budget would be “sober in its assessments, honest in its accounting and [lay] out in detail my strategy for investing in what we need, cutting what we don’t and restoring fiscal discipline.”
He was expected to outline some broad themes of his budget request today at a White House summit on fiscal policy and touch on it during his first speech to Congress tomorrow evening.
He is slated to officially send at least a summary of it to Congress on Thursday, barely a week after his US$787 billion economic stimulus plan became law.
Obama’s budget also is expected to take steps toward his campaign promises of establishing universal health care and lessening the country’s reliance on foreign oil.
The official, who spoke on the condition of anonymity because the president has not yet released his budget, said Obama hopes to achieve his deficit-reduction goal by generating savings as he follows through on three core campaign promises over the next four years.
He has pledged to wind down the Iraq War by withdrawing most combat troops within 16 months of taking office. He also has said he would let the temporary Bush tax cuts expire in 2011 for people making more than US$250,000 a year, effectively raising taxes for them. And, he has vowed to scale back spending and improve government efficiency by eliminating programs that don’t work.
In the weekly address, Obama mapped out an ambitious agenda to pull the US out of its worst economic crisis since the Great Depression of the 1930s. He said the country also must stem home foreclosures, repair the banking system, get credit flowing again and revamp financial industry regulations.
Obama has staked his presidency on turning around the quickly slumping US economy, but the bad news has continued even after he signed the massive stimulus package into law on Tuesday.
On Friday, the Obama administration addressed two of the biggest challenges of the US economic crisis, warning that auto companies need major restructuring and reassuring Wall Street that he does not plan to nationalize two of the country’s ailing banks.
Investors have shown decreasing confidence that US banks can right themselves. Citigroup and Bank of America have already received significant help from taxpayers as the government has rushed in to try to save the financial sector, which has been choked by bad assets and seen the flow of credit shrink.
On Wall Street, talk of nationalization of Citigroup and Bank of America Corp prompted investors to continue to balk, worried that the government would have to take control and wipe out shareholders in the process. Citigroup fell 20 percent, while Bank of America fell 12 percent in afternoon trading but also came off their lowest levels.
“This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government,” White House press secretary Robert Gibbs said on Friday when asked about nationalizing the banks.
In his speech on Saturday, Obama said Americans would start reaping the benefits of the tax cuts in the stimulus package by April 1.
“Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans,” Obama said.
The president said his signature two-year “Making Work Pay” tax break would affect 95 percent of working families, and, in six weeks’ time, a typical family will start taking home at least US$65 more every month.
The credit is phased out for higher-income taxpayers, defined as individuals who have a modified adjusted gross income of between US$75,000 and US$95,000, and married couples filing jointly who make between US$150,000 and US$190,000.
In concert with Obama’s announcement, the Treasury Department on Saturday began directing employers to reduce the amount of taxes withheld from people’s paychecks in accordance with the new law as soon as possible and not later than April 1.
Obama’s ambitious package of federal spending and tax cuts is designed to revive the economy and save or create 3.5 million jobs.
It will inject a boost of cash into transportation, education, energy and health care, while aiming to help recession victims through tax cuts, extended unemployment benefits and short-term health insurance assistance. But it will also add to a rapidly growing national debt.
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