UPDATE 1-Obama: Too much debt could fuel double-dip recession

Wed Nov 18, 2009 6:26am EST

Related Topics

* Obama warns of double-dip recession, loss of confidence

* Delicate balance to expand economy and reduce debt

* Obama eyes export growth to fuel job creation

* Tax provisions could encourage businesses to hire sooner (Adds quotes, NBC interview, background)

By Caren Bohan

BEIJING, Nov 18 (Reuters) - President Barack Obama gave his sternest warning yet about the need to contain rising U.S. deficits, saying on Wednesday that if government debt were to pile up too much, it could lead to a double-dip recession.

With the U.S. unemployment rate at 10.2 percent, Obama told Fox News his administration faces a delicate balance of trying to boost the economy and spur job creation while putting the economy on a path toward long-term deficit reduction.

His administration was considering ways to accelerate economic growth, with tax measures among the options to give companies incentives to hire, Obama said in the interview with Fox conducted in Beijing during his nine-day trip to Asia.

"It is important though to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession," he said.

Fox News, which released a transcript of the interview, showed that comment by Obama on Wednesday morning and said the full discussion would be broadcast later in the day.

JOBS FORUM

Obama is scheduled to hold a forum with U.S. business leaders and financial experts on Dec. 3 to discuss ways to lift the economy.

He said he had not decided yet whether any measures to boost the economy should be deficit neutral, with that being one of the things to be examined at the forum.

"Our first job was to get the economy to recover. And we're now seeing that," Obama said.

"We've seen economic growth (in the third quarter). We anticipate economic growth next quarter as well. I always said the job growth would lag behind economic growth. The question now is how can we accelerate it."

In an interview with NBC News, Obama said "there are a whole range of ideas out there" about how to kick-start hiring by businesses starting to invest and show profits again.

"We've examined a lot of them but one of the benefits of convening this group is it gives us a chance to talk directly to small businesses, medium-size businesses, the main drivers of employment to find out what exactly is going on."

Asked whether the jobs forum should have been held sooner, Obama said the focus after he took office in January was "to make sure we didn't slip into a Great Depression."

"We've gotten that job done," he told NBC. "Our next job is to make sure that we can accelerate the job growth because I recognize that people are really hurting right now."

Obama told Fox that one of his messages on his trip was that the United States should look for further export opportunities, especially in fast-growing areas of the world like the Asia-Pacific region.

"If we just boosted our share of exports by 1 percent, that might be 250,000 well-paying jobs in the United States. So export promotion would be an example of something we could do without spending money," he said.

"There may be some tax provisions that can encourage businesses to hire sooner rather than sitting on the sidelines. So we're taking a look at those." (Editing by John O'Callaghan)

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