Obama unveils multi-trillion dollar spending plan

US PRESIDENT Barack Obama unveiled a multi-trillion dollar spending plan yesterday, pledging an intensified effort to combat high unemployment and asking Congress to quickly approve new job-creation efforts that would boost the deficit to a record-breaking $1.56 trillion (€1.12tn).

Obama’s new budget blueprint preaches the need to make tough choices to restrain run-away deficits, but not before attacking what the administration sees as the more immediate challenge of lifting the country out of a deep recession that has cost 7.2 million jobs over the past two years.

The result is a budget plan that would give the country trillion-dollar-plus deficits for three consecutive years.

Obama’s new budget projects a spending increase of 5.7% for the current budget year and forecasts that spending will rise another 3% in 2011 to $3.83tn.

“Until America is back at work, my administration will not rest and this recovery will not be finished,” Obama said.

He is to cut his predecessor’s signature space programme to return astronauts to the moon. NASA already spent $9.1bn on the programme, which was projected to cost $100bn by 2020.

Obama’s new budget said NASA will be “launching a bold new effort” with an extra $1.2bn annually for five years, money expected to be used to encourage private companies to build, launch and operate their own spacecraft for the benefit of NASA and others.

Addressing the fact that his budget first projects big increases in the deficit before starting to lower these imbalances, Obama told reporters: “It’s very important to understand, we won’t be able to bring down this deficit overnight given that the recovery is still taking hold and families across the country still need help.”

Obama’s budget offers tax cuts for businesses, including a $5,000 tax credit for hiring new workers this year, help for the unemployed and $25bn more for cash- strapped state governments. All the temporary measures is expected to boost the deficit by $245bn over the next two years.

The deficit for this year is expected to be a record- breaking $1.56tn, topping last year’s $1.41tn gap, a number which dwarfed the previous record of $454.8bn set in 2008 under George W Bush.

The administration is forecasting that deficits over the next decade will add an additional $8.5tn to thenational debt, even if Congress adopts the administration’s package of proposals to trim future deficits starting in 2011.

Those include a three- year freeze on spending for government programmes, an effort which does not touch popular benefit programmes such as Social Security and Medicare and which also exempts defence and homeland security. It also proposes a boost in taxes on the wealthiest Americans, families making more than $250,000 annually, by allowing the Bush tax cuts of 2001 and 2003 to expire.

Republicans were not impressed with Obama’s deficit cutting, saying it fell far short of the steps needed.

“This country is sinking into a fiscal quagmire,” said Sen Judd Gregg, the top Republican on the Senate Budget Committee. “These circumstances call for a bold, game-changing budget that will turn things around.”

Obama’s new budget assumes the enactment of a comprehensive healthcare programme, yet to be passed. The deficit for this year is expected to be 10.6% of the total economy, a figure unmatched since World War II.