Bloomberg reported that US President Mr Barack Obama sent Congress a USD 3.7 trillion budget that projects the federal deficit will exceed USD 1 trillion for the fourth consecutive year in 2012 before falling to more sustainable levels by the middle of the decade.
The deficit for the current fiscal year is forecast to hit a record USD 1.6 trillion or 10.9% of gross domestic product, up from the USD 1.4 trillion the administration estimated previously. It would be USD 1.1 trillion in 2012 or 7% of GDP. By 2015 it would decline to USD 607 billion or 3.2% of GDP.
The president's budget plan would reduce federal shortfalls by USD 1.1 trillion over a decade through spending cuts in areas ranging from heating subsidies for the poor to grants for airports and water treatment plants. It also would increase revenue, including letting taxes rise for married couples with more than USD 250,000 in annual income and ending some tax breaks for oil, gas and coal companies.
Mr Obama said that he will meet his pledge to cut the deficit in half by the end of his first term. Speaking at a middle school in suburban Baltimore, he said the government must spend to support education, research and infrastructure to keep the US economically competitive.
He added that "The only way we can make these investments in the future is if our government starts living within our means. What we've done here is make a down payment."
Release of the budget for the fiscal year that begins October 1st 2010 sets up a battle with Republicans who control the House and who already have deemed the plan insufficient to reduce the federal debt. The budget falls short of the deficit reduction that Obama’s fiscal commission proposed in December and would have a modest impact on the USD 12 trillion in total deficits the Congressional Budget Office projects the government will run up over the next 10 years.
That is primarily because Mr Obama isn't offering an overhaul of Medicare, Medicaid or Social Security, the entitlement programs that represent about 40% of the budget and are primary drivers of long term deficits.
White House budget director Mr Jacob Lew defended the spending blueprint against criticism that it fails to recommend any major steps to reduce the cost of entitlements.
He added that "I know that would make a lot of people happy for there to be a big, bold proposal. My experience over the last 30 years is that when you put a proposal out there, before you've laid the foundation for a bipartisan discussion, it actually doesn’t move the process forward and instead sets it back."
House Budget Committee Chairman Mr Paul Ryan, a Wisconsin Republican, said in a statement that "Mr Obama has failed to tackle the urgent fiscal and economic threats before us. The president's budget accelerates our country down the path to bankruptcy."
Some of Obama's fellow Democrats were critical as well. Senate Budget Committee Chairman Mr Kent Conrad of North Dakota said the government needs a much more robust package of deficit and debt reduction. He added that "It is not enough to focus primarily on cutting the non security discretionary part of the budget. We need a comprehensive long term debt reduction plan, in the size and scope of what was proposed by the president’s fiscal commission."
Mr Obama said that both parties will have to take steps beyond those contained in his budget because cutting annual domestic spending won' be enough to meet our long term fiscal challenges. He added that "So what we've done here is make a down payment, but there’s going to be more work that needs to be done."
(Sourced from www.bloomberg.net)
