Obama takes fiscal balancing act to US heartland
President Barack Obama on Wednesday took to America's heartland his two-pronged agenda of investing and innovating to create US jobs and spur economic growth while reining in spending, a recipe Republicans say is unworkable.
January 27, 2011 / 10:04 IST
President Barack Obama on Wednesday took to America's heartland his two-pronged agenda of investing and innovating to create US jobs and spur economic growth while reining in spending, a recipe Republicans say is unworkable.
Underlining the enormity of the task, the Congressional Budget Office -- the day after Obama's televised State of the Union address -- said the US deficit will reach USD 1.48 trillion this year, 40% higher than its previous forecast, due to the extension of tax cuts first put in place under former President George W Bush.This sobering reminder followed Obama's prime-time balancing act in which he struck a more conciliatory tone toward newly empowered congressional Republicans. His retooled, business-friendly approach is aimed at moving to the political center, which may be crucial to his 2012 re-election chances.Obama traveled on Wednesday to Wisconsin, a political battleground state he won in the 2008 presidential election, to visit three plants, including a renewable energy company, to drive home his message of innovation and job creation.Obama pressed his message that the country needs to invest in technology and clean energy companies like Orion Energy Systems in Manitowoc, Wisconsin."In this new and challenging time, when America is facing tougher competition from countries around the world than ever before, we're going to need to up our game. We're going to need to go all in. We're going to need to get serious about winning the future," Obama said to a crowd of workers at the plant.Republicans, who routed Obama's Democrats in the November congressional elections, said he did not go far enough on Tuesday night in embracing fiscal restraint. Obama will have a fight on his hands over his budget plan to be presented in February.In a bid to show he has fiscal discipline, Obama proposed a five-year freeze in some domestic spending, which he said would cut $400 billion from budget deficits over a decade, a move applauded by U.S. debt and stock traders. Republicans seeking USD 100 billion in cuts this year to help get the United States on a sounder fiscal footing called plans by Obama for a spending freeze too little, too late."There's got to be some kind of absolute iron-clad path to getting (spending) down," Republican Senator John McCain said on ABC's "Good Morning America" program on Wednesday.Obama walked a fine line in Tuesday's speech."Basically, what I heard were a lot ideas to raise spending followed by ideas to cut spending. You can't have it both ways," brokerage house employee Bryan Hofferica, 32, said in Chicago.Obama offered some potentially appealing proposals to his newly empowered Republican opponents -- a corporate tax cut, reform of the tax code and an end to pet spending projects coveted by many lawmakers.World stocks rose and the dollar hit a two-month low against the euro after Obama's promise of spending cuts cemented expectations that the US Federal Reserve will retain faith in its loose policy. Republicans have threatened to obstruct Congress raising the national debt ceiling by the time it hits a statutory limit of USD 14.3 trillion by March 31. The country could default on its debt, causing financial havoc, if the limit is not increased.Republican insistence on maintaining tax cuts even for the richest Americans is complicating Obama's attempt to close the fiscal gap.'Excess weight'To Republican calls for even deeper spending cuts, Obama said, "Let's make sure what we're cutting is really excess weight." He made clear that caution was needed to avoid derailing the fragile economic recovery.Obama sought on Tuesday night to reassure Americans weary of stubbornly high 9.4% unemployment, fearful of rising debt, dismayed at vicious political rhetoric and worried that their country is falling behind economic powers like China and India.The challenge will be how he finances investment projects for future growth while addressing a dire fiscal outlook. On this Obama gave no hint, leaving details to his budget due next month.Moreover, his proposed freeze would not apply to the big entitlement programs -- such as the Social Security retirement program and the Medicare health insurance program -- at the heart of America's deficit problem.Still, analysts praised the cautious start.Robert Tipp, chief investment strategist at Prudential Fixed Income, called it an important shift toward fiscal restraint that debt markets need to see. "It's a big positive even with these baby steps toward that direction. At least he's teeing up these issues," he said.US stocks rose after Obama's call for a lower corporate tax rate.At the World Economic Forum in Davos, business leaders gave a mixed reaction to Obama's proposed austerity steps proposed, with some questioning whether they go far enough. "American corporates and Western corporates are really uncertain, and I don't think last night's speech really gets us further in terms of removing that uncertainty," Martin Sorrell, CEO of WPP, the world's largest advertising group, told a panel. 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!
