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Obama vows to cut spending, but deficit remains record high
Date: 2011/2/17 Click: 1866
The U.S. federal deficit in fiscal year 2011 is expected to top the historically high level of 1.645 trillion dollars, despite the Obama administration's constant pledge to cut spending, according to the U.S. government' s 2012 budget proposal released on Monday.


In a 3.73-trillion-dollar budget sent to Congress for fiscal year 2012 beginning from Oct. 1, U.S. President Barack Obama outlined a series of deficit reduction measures.

To address widespread public fear toward the ballooning deficit, the Obama administration has pledged to cut the deficit by 1.1 trillion dollars over the next 10 years.

The budget would eliminate or reduce funding to a total of 300 government programs for savings of 33 billion dollars in 2012.

It was a "very difficult" budget, said White House budget chief Jacob Lew. "We have to make tough trade-offs."

The White House plans to freeze non-security discretionary spending for five years, lowering the deficit by 400 billion dollars over 10 years. That pledge, unveiled in Obama's State of the Union address last month, will save 33 billion dollars in fiscal 2012, which starts on Oct. 1, 2011.

Healthcare savings over 10 years will spare 62 billion dollars to finance a traditional yearly "Doc-fix" to reimburse physicians to ensure they keep seeing Medicare patients.

Defense spending in the budget will be cut by 78 billion dollars over five years, as previously announced, and will be 5 percent lower in 2012 compared with the level sought in 2011.

In 2012, Obama plans to trim 90 billion dollars from government spending, while dramatically boosting tax revenues.

Obama plans to trim the deficit as a share of the U.S. economy to 3.2 percent by 2015 from the projected ratio of 10.9 percent in 2011.

The White House said that two-thirds of the deficit reduction would come from lower spending, and the other one-third of savings would come from tax increases.

"These are tough choices. I think this budget will withstand the test that we live within our means," Lew said.


Although the Obama administration highlighted its plan to cut deficit, the austerity policy is not in the near term. Rather, the government insists on more spending to "win the future."

Obama stressed his plan on investments in -- or, as Republicans would say, spending on -- education, energy, infrastructure and innovation.

In a speech delivered at a middle school in Maryland on Monday, Obama echoed his State of the Union address that the country should not sacrifice those investments.

On balance, the budget shortfall in 2011 would equal an unsustainable 10.9 percent of the gross domestic product (GDP), the basic measure of a country's overall economic output.

The budget projects that the budget red ink in 2012 will fall to 1.101 trillion dollars. But it will remain the fourth year in a row that the U.S. fiscal deficit surpasses the 1-trillion-dollar mark.

In 2010, the U.S. budget deficit hit 1.29 trillion dollars after it recorded 1.42 trillion dollars in 2009.

The surge in the deficits reflects not only the increased spending but also a big drop in tax revenues, reflecting the 8 million people who have lost jobs since the recession began and weaker corporate tax receipts.

Since last year's budget, the fiscal position has worsened, partly because of the tax-cut compromise passed by the lame-duck Congress in December.

Fears are growing that the inability of the United States to get its budget under control could eventually lead to a debt crisis.

Obama noted that his fiscal 2012 budget was a "down payment" on what was needed to get the United States on a strong fiscal path, saying Democrats and Republicans must work together to do more.

Analysts say that the Obama budget will face tough battle in the Congress.

Before becoming law, the proposal will have to survive a marathon budget process, and a Republican-controlled House that favors far more severe cutbacks.

"We're broke," House Speaker John Boehner said. He criticized that the Obama administration's budget is not winning the future, but spending the future.

"The President's budget spends too much, taxes too much, and borrows too much -- shifting job growth today and leaving our children with a diminished future," Paul Ryan, chairman of the House Committee on the Budget, said in a statement in response to the release of Obama's budget.

"In this critical test of leadership, the President has failed to tackle the urgent fiscal and economic threats before us," Ryan said.
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