Obama warns spending cuts could hurt US recovery
President Barack Obama warned Republicans on Tuesday against making symbolic cuts in spending that could damage the fragile US economic recovery.
February 16, 2011 / 08:53 IST
President Barack Obama warned Republicans on Tuesday against making symbolic cuts in spending that could damage the fragile US economic recovery.
Republicans in Congress have lambasted the budget for 2012 that Obama announced on Monday and have presented him with an immediate challenge. They plan to pass legislation in the House of Representatives by week's end to cut this year's spending by at least 14%, or USD 61 billion, to show how serious they are about reducing the deficit."I think it is important to make sure that we don't try to make a series of symbolic cuts this year that could endanger the recovery," Obama told a White House news conference."If the steps that we take then prompt thousands of layoffs in state or local government or core vital functions of government aren't performed properly, well that could also have a dampening impact on our recovery," he said.Treasury Secretary Timothy Geithner echoed the president's message in testimony to Congress, saying cutting government services and programs too soon would destroy thousands of jobs. The US economy has been slow to recover from the recession that ended in 2009 and unemployment is still at nine percent, threatening Obama's chances of re-election in 2012.Data on Tuesday showed growth in sales at US retailers slowed in January, partly due to harsh winter weather across much of the country, but the trend remained supportive of an acceleration in economic growth.Republicans said the White House is ignoring the severity of the country's fiscal problems."It's disturbing that the president won't even fully acknowledge the crushing scale of our fiscal crisis - and the fact that his budget does nothing to address it," said Brendan Buck, a spokesman for Republican House of Representatives Speaker John Boehner.Obama's 2012 budget would cut the budget deficit by USD 1.1 trillion over ten years. On Tuesday, he signalled a willingness to go further on spending cuts -- just not in the short term.He called for reforming the gigantic government pension and healthcare programs, as well as simplifying the US tax code.Financial markets, he said, would be satisfied if both parties showed a willingness to work together on cutting the deficit over the long-term."I think what the markets want to see is progress," he said. "If they see us chipping away at this problem in a serious way, even if we haven't solved 100% of it all in one fell swoop, then that will provide more confidence that -- that Washington can work."
Social security, medicare
How well Washington works will be put on display in the coming weeks.Republicans in Congress were prepared to launch what promises to be a raucous debate over 2011 government spending in the House of Representatives.Conservatives -- with Tea Party backing -- were hoping to slice much deeper with hundreds of amendments that they hope to test on the House floor. But the Senate, controlled by Obama's Democrats, is unlikely to back deep cuts approved by the House.Obama's budget did not touch the biggest drivers of the deficit, mandatory spending for Social Security pensions, Medicare and Medicaid healthcare programs for the poor and elderly, which make up about two-thirds of the budget.Obama signalled a willingness to tackle those expensive entitlement programs and urged the opposition party to work with him to do so.He said he wanted to simplify the unwieldy tax code, which could help reduce a US budget deficit that the White House estimates will hit USD 1.65 trillion this year.White House Budget Director Jack Lew traveled to Capitol Hill to defend Obama's budget blueprint for next year, only to hear Republicans accuse the president of failing to tackle the nation's deep fiscal problems."The president's budget disregards the drivers of our debt crisis and the insolvency of our entitlement programs, House Budget Committee Chairman Paul Ryan told Lew.Republicans on the tax-writing House Ways and Means Committee are expected to give a similarly rough ride to Geithner. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
