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Obama struggles to balance budget cuts, investment

By Agence France-Presse
Sunday, February 13, 2011 13:48 EDT
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WASHINGTON – US President Barack Obama unveils his fiscal 2012 budget Monday, an election year plan forged from conflicting needs to cut spending and stoke the economic recovery.

With vast crisis payments and sharply lower tax revenues making it difficult for the government to balance its books, Obama will set out an austerity plan that will help set the tone for next year’s presidential race.

It is expected to address widespread public anger that the government is living beyond its means, detailing tens if not hundreds of billions of dollars of spending cuts, while making investments that will help “win the future.”

To square the circle, Obama has already said the budget will set in motion cuts to non-essential programs worth $400 billion over five years.

It is also expected to cut $78 billion from the defense budget over five years, slash energy subsidies for the poor and freeze public workers’ pay.
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But faced with high unemployment and an economic recovery that is still struggling to escape the orbit of the 2008 economic crisis, Obama will also give states more flexibility to pay for unemployment benefits.

He will also argue for an $18 billion plan to improve high speed Internet access, and $8 billion for high-speed railways in the fiscal year starting October 1.

At 2,448 pages and a weight of 10 pounds (4.5 kilograms) the budget will contain something for most members of Congress — who have to approve it — but plenty more that will be loathed.

Ahead of the budget’s publication, Republicans have been outdoing themselves in the promotion of ever-deeper spending cuts and criticizing Obama for not doing enough.

Republicans argue spending cuts will help boost growth, while the Obama administration argues cuts are needed, but should be carefully measured for fear of derailing the recovery.

Bringing the two sides together is likely to be a long process that takes up most of the year. Congress has yet to approve the fiscal 2011 budget.

“There’s no limit to the amount we’re willing to cut to help get our economy moving again,” said House Speaker John Boehner, promising a $100 billion cut in spending to the 2011 budget, with more to come.

But experts say cuts in discretionary spending, like those proposed by Obama and the Republicans, are just a drop in the fiscal bucket.

“This spending accounted for just one-fifth of total outlays last fiscal year,” said Augustine Faucher of Moody’s Analytics.

“Even if it had been entirely eliminated — wiping out the budgets for running the government, education, national parks and the like –the fiscal 2010 deficit still would have topped $600 billion.”

Fears are growing that the inability of the United States to get its budget under control could eventually lead to a debt crisis and a possible default that would plunge the globe into crisis.

This week, Federal Reserve chairman Ben Bernanke warned that dramatic change was inevitable.

“The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes… (or) as a rapid and painful response to a looming or actual fiscal crisis,” Bernanke said.

The US budget deficit is currently at the highest levels since World War II, and is projected to hit $1.48 trillion this year, or 9.8 percent of gross domestic product (GDP), according to the Congressional Budget Office.

Agence France-Presse
Agence France-Presse
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
 
 
 
 
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  • parrots_abound

    The 11 States most likely to go bankrupt…. http://dailybail.com/slideshows/states-most-likely-to-go-bankrupt/7996736

    State Pensions adding much fuel to the fires…. http://dailybail.com/home/make-this-story-go-viral-you-thought-california-state-pensio.html

    America, we are being looted at the Federal level and State level by Government all around. The STATE…and the state hates you and wants your money to go to privileged few while the Corporations want their privileged few to do the same.

    We’re being robbed and nobody’s calling the cops.

  • Anonymous

    I have a feeling that these austerity measures are going to make Obama a one term president. Once the democrats see that almost all the austerity is on the backs of the poor and middle class, they will dump him. Also if it is correct that he is asking for a 50 billion dollar bailout for the states, its not even a drop in the bucket. All this would be is a way to get the republicans to agree with some part of the bill.

  • Anonymous

    Tax cuts for rich people and corporations and bread crumbs for everyone else. How about we cut all funding for road projects that go to rich neighborhoods. They like smaller government, let them fix their own pot holes.

  • Anonymous

    we could all pay for this… its simple

    1.48 trillion divided by 307,006,550 people(according to the census) = $4,820.74

    thats simple right?

    lol

    but wait.. what if we changed it so that billionares payed a little more, so the poor can pay less?

    thats simple right?
    thas worth getting out of this mess for right?

    LOL!!!

    im really getting sick of this country.

  • http://pulse.yahoo.com/_3QIJ4LGZX6PZOJSD57QIC3NRAA Straw

    We’re still feeling the effects from the last attempt at government investing – the housing market.

    I’m sure they’ll pick winners this time for sure. No boondoggles here. Move along.

  • http://profiles.yahoo.com/u/YVBA25ZZJYN5C44WGILY6P4X34 Raven

    Now that’s a good idea.

  • Anonymous

    Oh Gee! I feel so sorry Obama is having problems cutting the budget! Perhaps if he hadn’t sided with the repubs and extend the bush tax cuts for the top 2% he would be having an easier time of it! And maybe, just maybe he wouldn’t have to cut help for low income heating bills………In the worst winter in years!!!!!!! Hey Obama, when you lie down with dogs………….

  • Anonymous

    It is also expected to cut $78 billion from the defense budget over five years, slash energy subsidies for the poor and freeze public workers’ pay.

    Wow, $78 Bn over five years. The 2010 defense budget was approx. $664 Bn. A whopping 2.3% cut, be still my heart. The Commies will be all over us as soon as word of this leaks out. It’ll be just like “Red Dawn” – except it’ll be the poor and the rapidly diminishing middle class that are going to have something get up their ass.

    Obama had a choice, the 2% or the 98%. It’s obvious which way he wants to go.

  • Guest

    Obama’s give away on the Bush tax cuts to the wealthiest Americans will add about 875 billion dollars to the deficit over the next two years. All he got for that was a 60 billion dollar temporary extension of unemployment benefits for a little over a year. Obama is at war with the middle class and the middle class is being routed.

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