Obama warns of `trillion-dollar deficits for years to come’January 7th, 2009 - 11:22 am ICT by IANS
Washington, Jan 7 (IANS) President-elect Barack Obama has warned Americans about the unparalleled prospect of “trillion-dollar deficits for years to come”, saying the exploding budget gap underscores the need for long-term reform of US finances.”We’re already looking at a $1 trillion budget deficit or close to a $1 trillion budget deficit, and potentially we’ve got $1 trillion deficits for years to come,” Obama told reporters Tuesday after a meeting with his economic and budget team.
“We’re going to have to stop talking about budget reform and we’re going to have to fully embrace it. It’s an absolute necessity.”
Obama’s remarks Tuesday were the latest in his drive to sell lawmakers and the public on a stimulus plan that could approach $775 billion over two years, legislation that will further pressure the already record-high deficit.
A plan being crafted by his transition team to jump start the economy will ban earmarks, the pork-barrel projects lawmakers insert into legislation without review, he said.
Obama repeated the proposed stimulus package will be evaluated by an oversight board, and said taxpayers will have access to information on how their money is spent.
Obama’s session with his economic team including Timothy Geithner, treasury secretary-designate, and Lawrence Summers, director-designate, National Economic Council was aimed at reviewing the medium-term budget outlook and discussing a fiscal 2010 budget that puts the government on a path to reduce the record deficit.
The government ran a record budget deficit of $454.8 billion for fiscal 2008, which ended in September.
“We’re going to have to bring significant reform not just to our recovery and reinvestment plan, but to the overall budget process, to address both the deficit of dollars and the deficit of trust,” Obama said. “We’ll have to make tough choices, and we’re going to have to break old habits.”
Obama sought to draw a distinction between the need to run what would likely be record deficits by any measure for the next several years and the necessity to begin bringing them down substantially in following years.
The Congressional Budget Office will release its latest budget estimates Wednesday, which will provide the first official predictions of the built-in shortfalls tied to the economic slowdown and the collapsing financial markets.
Obama’s team of economic and budget advisers have spent nearly two months scouring the budget, preparing to submit their first budget.
“When the American people spoke last November, they were demanding change - change in policies that helped deliver the worst economic crisis that we’ve see since the Great Depression,” Obama said.
“They were demanding that we restore a sense of responsibility and prudence to how we run our government,” he added.
Analysts predict that the federal deficit will hit a new record of at least $1 trillion this year, which would be not only be more than double the previous record in 2005, but would also overtake the previous record for deficit as a share of the gross domestic product.
But economists generally agree that Obama and the Congress have no choice except to ignore short-term deficits and place top priority on fighting the country’s worst economic downturn in at least a half-century.
Goldman Sachs recently estimated that government debt will balloon by $1.75 trillion in 2009. But Goldman analysts were optimistic that borrowing costs will remain low, partly because they predicted that the US saving rate is likely to soar as both consumers and businesses hold back on spending.
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