ElCount
02-15-2009, 12:10 AM
FEBRUARY 14, 2009
Obama to Shift Focus to Budget Deficit
By JONATHAN WEISMAN
With a $787 billion stimulus package in hand, President Barack Obama will pivot quickly to address a budget deficit that could now approach $2 trillion this year.
He has scheduled a "fiscal-responsibility summit" on Feb. 23 and will unveil a budget blueprint three days later, crafted to put pressure on politicians to address the country's surging long-term debt crisis.
Speaking Friday to business leaders at the White House, the president defended the surge of spending in the stimulus plan, but he made sure to add: "It's important for us to think in the midterm and long term. And over that midterm and long term, we're going to have to have fiscal discipline. We are not going to be able to perpetually finance the levels of debt that the federal government is currently carrying."
Along those lines, White House budget director Peter R. Orszag has committed to instituting tougher budget-discipline rules -- once the economy turns around. Those include a mandate that any "nonemergency" spending increases be offset by equal spending cuts or tax increases.
Officials say the budget blueprint to be released this month will also attempt to make public the full extent of the dire fiscal situation, by not repeating some of the accounting used in crafting President George W. Bush's budgets. Recent budget blueprints excluded from deficit projections the long-term costs of wars in Iraq and Afghanistan. Those budgets also didn't include the cost of preventing the alternative minimum tax -- instituted in 1969 to ensure the rich didn't escape taxation -- from hitting the middle class.
Officials are examining whether to include those costs. The budget will project out 10 years, not the five-year forecast instituted by Mr. Bush. And with the stimulus cost, the fiscal 2009 deficit in the document is likely to exceed the $1.2 trillion forecast by the Congressional Budget Office last month.
Obama aides say they aren't looking for quick action, but a start to the conversation. "We're going to bring some things to the table, but we're going to listen to everybody else," said Christina Romer, chairman of the White House Council of Economic Advisers, in an interview Friday. "It's a giant issue, and it's not one we can solve unilaterally."
The president met with 44 fiscally conservative "Blue Dog" Democrats this week and gave a nod to legislation that would set up commissions to deal with long-term deficit strains. The commissions would then present plans to Congress for an up-or-down vote.
"We feel like we've found a partner in the White House," said Rep. Charlie Melancon (D., La.), a Blue Dog co-chairman.
For Mr. Obama, the national debt has become a pressing dilemma. If he transitions too quickly from priming the economy with money to pulling back for the sake of fiscal rectitude, the president risks choking off whatever economic recovery he might spark in the next year. Ms. Romer points to the seesaw nature of the New Deal, when President Franklin D. Roosevelt would spend big one year and then back away the next, never allowing the economy really to get traction.
But if the administration waits too long to address the deficit, long-term interest rates may have to rise to attract buyers for all those Treasury bonds. That too could send the economy back into recession.
White House economic aides believe they have room to maneuver. Demand for Treasury bonds will remain strong for the next two to three years, a senior administration official said. But the White House also considers it imperative to signal how serious Mr. Obama is about a debt that could soar toward levels experienced by Japan, whose national debt equals the size of the country's economy. At just over 40% of gross domestic product, the U.S. debt is the country's highest in a decade.
That is manageable, administration economists say, but needs to be stabilized.
Projections for 2009 deficit range from Goldman Sachs's $1.43 trillion to $1.9 trillion from economic firm Strategas Research Partners. At 13.5% of GDP, a $1.9 trillion shortfall would more than double the peacetime record during Ronald Reagan's presidency, and approach the mark set in 1942 as the U.S. joined World War II.
http://online.wsj.com/article/SB123457407865686565.html#printMode
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This is some positive news although maybe not too heart warming since he did say a few weeks ago that this country will most likely see trillion dollar deficits for at least the next four years.
Obama to Shift Focus to Budget Deficit
By JONATHAN WEISMAN
With a $787 billion stimulus package in hand, President Barack Obama will pivot quickly to address a budget deficit that could now approach $2 trillion this year.
He has scheduled a "fiscal-responsibility summit" on Feb. 23 and will unveil a budget blueprint three days later, crafted to put pressure on politicians to address the country's surging long-term debt crisis.
Speaking Friday to business leaders at the White House, the president defended the surge of spending in the stimulus plan, but he made sure to add: "It's important for us to think in the midterm and long term. And over that midterm and long term, we're going to have to have fiscal discipline. We are not going to be able to perpetually finance the levels of debt that the federal government is currently carrying."
Along those lines, White House budget director Peter R. Orszag has committed to instituting tougher budget-discipline rules -- once the economy turns around. Those include a mandate that any "nonemergency" spending increases be offset by equal spending cuts or tax increases.
Officials say the budget blueprint to be released this month will also attempt to make public the full extent of the dire fiscal situation, by not repeating some of the accounting used in crafting President George W. Bush's budgets. Recent budget blueprints excluded from deficit projections the long-term costs of wars in Iraq and Afghanistan. Those budgets also didn't include the cost of preventing the alternative minimum tax -- instituted in 1969 to ensure the rich didn't escape taxation -- from hitting the middle class.
Officials are examining whether to include those costs. The budget will project out 10 years, not the five-year forecast instituted by Mr. Bush. And with the stimulus cost, the fiscal 2009 deficit in the document is likely to exceed the $1.2 trillion forecast by the Congressional Budget Office last month.
Obama aides say they aren't looking for quick action, but a start to the conversation. "We're going to bring some things to the table, but we're going to listen to everybody else," said Christina Romer, chairman of the White House Council of Economic Advisers, in an interview Friday. "It's a giant issue, and it's not one we can solve unilaterally."
The president met with 44 fiscally conservative "Blue Dog" Democrats this week and gave a nod to legislation that would set up commissions to deal with long-term deficit strains. The commissions would then present plans to Congress for an up-or-down vote.
"We feel like we've found a partner in the White House," said Rep. Charlie Melancon (D., La.), a Blue Dog co-chairman.
For Mr. Obama, the national debt has become a pressing dilemma. If he transitions too quickly from priming the economy with money to pulling back for the sake of fiscal rectitude, the president risks choking off whatever economic recovery he might spark in the next year. Ms. Romer points to the seesaw nature of the New Deal, when President Franklin D. Roosevelt would spend big one year and then back away the next, never allowing the economy really to get traction.
But if the administration waits too long to address the deficit, long-term interest rates may have to rise to attract buyers for all those Treasury bonds. That too could send the economy back into recession.
White House economic aides believe they have room to maneuver. Demand for Treasury bonds will remain strong for the next two to three years, a senior administration official said. But the White House also considers it imperative to signal how serious Mr. Obama is about a debt that could soar toward levels experienced by Japan, whose national debt equals the size of the country's economy. At just over 40% of gross domestic product, the U.S. debt is the country's highest in a decade.
That is manageable, administration economists say, but needs to be stabilized.
Projections for 2009 deficit range from Goldman Sachs's $1.43 trillion to $1.9 trillion from economic firm Strategas Research Partners. At 13.5% of GDP, a $1.9 trillion shortfall would more than double the peacetime record during Ronald Reagan's presidency, and approach the mark set in 1942 as the U.S. joined World War II.
http://online.wsj.com/article/SB123457407865686565.html#printMode
----------------------------------------------------------------------------
This is some positive news although maybe not too heart warming since he did say a few weeks ago that this country will most likely see trillion dollar deficits for at least the next four years.