Saturday, March 21, 2009

US budget 'to create huge deficit'

FRIDAY, MARCH 20, 2009
22:28 MECCA TIME, 19:28 GMT

Obama says he will not cut "investments that will lead to real growth and prosperity" from the budget [EPA]
The US budget that Barack Obama, the president, is trying to push through congress will produce a $9.3 trillion deficit over the next 10 years, congressional budget office figures say.

At $2.3 trillion more than predicted by the White House, the figures released on Friday could prove to be a major obstacle to passing the budget.

Obama's budget promises universal health care and higher spending for other domestic programmes such as education and research into renewable energy.

Democrats are preparing to put the budget for preliminary voting before congress next week.

Republicans began to pile on the pressure after the figures were released.

"Under the president's plan, our debt will increase to shocking levels that are simply unsustainable and will devastate future economic opportunities for our children and grandchildren," Judd Gregg, the senior Republican senator on the budget committee, said.

Worsening economy

The worsening economy has created many of the deficit problems facing Obama, with the shortfall for this financial year, which began on October 1, set to be about $1.8 trillion - about $93bn more than forecast by the White House - according to the figures.

"What we will not cut are investments that will lead to real growth and prosperity over the long term"

Barack Obama,
US president

The 2009 deficit, fuelled by the $700 billion Wall Street bailout and falling tax revenues, is four times the previous $459bn record set just last year.

However, the White House responded to the news by stating that the deficit would not force Obama to lessen his ambitions or thwart his plans to halve the deficit to $533bn by 2013.

"None of the numbers today changed the president's either objectives or his ability to achieve that deficit reduction," Robert Gibbs, the White House spokesman, said.

Earlier, without referring to the figures, Obama insisted that his agenda was still on track.

"What we will not cut are investments that will lead to real growth and prosperity over the long term," he said.

"That's why our budget makes a historic commitment to comprehensive health care reform. That's why it enhances America's competitiveness by reducing our dependence on foreign oil and building a clean energy economy."


The budget office says the deficit under Obama's policies would never go below four per cent of the size of the economy, figures that many economists agree are unsustainable.

By the end of the decade, the deficit would exceed five per cent of gross domestic product, considered to be a dangerously high level.

"I think deficits of 5 per cent is unsupportable," Mark Zandi, the chief economist at Moody's, said.

"It will lead to higher interest rates to the point where it will force policymakers to make changes."

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