Obama to target govt spending

Sunday, April 19, 2009 at 9:28 PM Posted by Beijing News


President Barack Obama, after a weekend of handshake diplomacy in the Caribbean, warned of "significant" risk to the US economy ahead of his first full cabinet meeting Monday to hash out plans to cut spending.

At the roundtable meeting, three months to the day after his inauguration, Obama plans to ask for specific proposals from his cabinet to cut government spending and "restore a sense of responsibility and accountability" to the US federal budget.

Faced with mushrooming budget deficits, the US leader Sunday called for "aggressive action" to counter the persistant credit jam that still clogs the financial system.

"While there have been some encouraging signs that our economy may be stabilizing, the risks remain real and significant," Obama said in an interview published in Fortune magazine Sunday.

"History has shown repeatedly that when nations do not take early and aggressive action to get credit flowing again, they have crises that last for many years instead of many months," he said.

The cabinet meet comes on the heels of a whirlwind weekend of diplomacy on the Caribbean island of Trinidad at the Summit of the Americas where, by the end, Obama tempered speculation that a historic thaw in relations between the United States and Cuba was around the corner.

The US embargo on the communist island, he said, would not be changed overnight. "Issues of political prisoners, freedom of speech and democracy are important, and can't simply be brushed aside," he said.

Back in Washington, however, domestic priorities are set to shape the agenda in coming weeks, as Obama's administration keeps on its efforts to reshape the economic outlook.

The nonpartisan Congressional Budget Office CBO forecast last month the budget deficit could hit 1.845 trillion dollars for the whole year, based on Obama's 3.5-trillion-dollar budget plan approved by Congress.

The CBO said its budget deficit estimate for fiscal 2009, which ends on September 30, would be four times the 2008 record shortfall and amount to 13.1 percent of the country's total economic output.

The Obama budget forecasts a 1.750 trillion dollar deficit in fiscal 2009, but foresees that figure falling to 1.171 trillion dollars in 2010.

The plan sees the deficit soaring to the largest percentage of gross domestic product since World War II.

The United States, Obama told Fortune, needs to update its regulatory codes with "sound rules of the road."

US economic priorities require revision to "reward drive and innovation instead of shortcuts and abuse," he added.

"My hope is that by taking the steps we are taking today, from stabilizing our financial system to helping our auto industry restructure to become more competitive, it will help speed the day that the government can get out of the way and let the private sector do what it does best -- innovate, create jobs, and grow the economy."

The latest government figures showed the economy contracted by 6.3 percent in the last quarter of 2008, following a home-mortgage meltdown that triggered financial turmoil and slammed the brakes on economic growth.

A modest return to growth is not expected by economists until the third quarter of 2009.

"Earnings dropped 84.7 percent from the previous year, from 645 billion dollars to 98.9 billion dollars, marking the largest one-year decline ever," it said.





Bodybuilders compete in the Open Kiev Cup for Bodybuilding competition in Kiev. AFP/Sergei Supinsky

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