Obama warns spending cuts could hurt U.S. recovery

WASHINGTON Tue Feb 15, 2011 5:06pm EST

1 of 3. Staff members wait to hand out stacks of President Barack Obama's proposed 2012 federal budget on Capitol Hill in Washington, February 14, 2011.

Credit: Reuters/Jonathan Ernst

Related Video

Related Topics

WASHINGTON (Reuters) - President Barack Obama warned on Tuesday that immediate, deep budget cuts could hurt the fragile economic recovery, but Republicans pressed to slash spending and brushed off concerns about potential job losses.

Republicans lambasted Obama's budget for 2012 released this week and demanded cuts now in areas such as education and space exploration. Obama -- who promises $1.1 trillion in deficit reduction over 10 years -- still wants to invest in areas such as high speed rail and energy efficiency to boost U.S. competitiveness.

The debate is moving toward a standoff. Republicans aim to pass legislation in the House of Representatives by week's end to cut this year's spending by at least 14 percent, or $61 billion. The White House says Obama would veto such a bill.

"I think it is important to make sure that we don't try to make a series of symbolic cuts this year that could endanger the recovery," he told a news conference.

"We've got to be careful ... Let's use a scalpel; let's not use a machete," he said.

Republicans were eager to wield the heavier instrument. House Speaker John Boehner said if his party's spending cuts led to job losses, that was the price of necessary austerity.

"Over the last two years since President Obama has taken office, the federal government has added 200,000 new federal jobs," Boehner said. "If some of those jobs are lost in this, so be it. We're broke."

Republicans berated Obama in last year's elections for not solving the problem of high unemployment, which remains at nine percent and threatens Obama's chances of re-election in 2012.

Obama called for reforming the expensive government pension and healthcare programs and repeated a pledge to simplify U.S. tax laws. But his main message focused on the economy, which has been slow to recover from the recession that ended in 2009.

Data on Tuesday showed growth in sales at U.S. retailers slowed in January, partly due to harsh winter weather across much of the country, but the trend remained supportive of an acceleration in economic growth.

GOING FURTHER

Obama signaled a willingness to go further on spending cuts -- just not in the short term. Financial markets, he said, would be satisfied if both parties worked together on cutting the deficit over the long-term.

"I think what the markets want to see is progress," he said. "If they see us chipping away at this problem in a serious way, even if we haven't solved 100 percent of it all in one fell swoop, then that will provide more confidence that -- that Washington can work."

How well Washington works will be put on display in the coming weeks.

Conservatives -- with Tea Party backing -- are pushing to make huge cuts this year with hundreds of amendments to the House bill. But the Senate, controlled by Obama's Democrats, is unlikely to back deep cuts approved by the House.

Obama's budget for 2012 did not touch the biggest drivers of the deficit, mandatory spending for Social Security pensions, Medicare and Medicaid healthcare programs for the poor and elderly, which make up about two-thirds of the budget.

Obama showed interest in tackling those expensive entitlement programs and urged the opposition party to work with him to do so.

He said he wanted to simplify the unwieldy tax code, which could help reduce a U.S. budget deficit that the White House estimates will hit $1.65 trillion this year.

White House Budget Director Jack Lew traveled to Capitol Hill to defend Obama's budget blueprint for next year, only to hear Republicans accuse the president of failing to tackle the nation's deep fiscal problems.

"The president's budget disregards the drivers of our debt crisis and the insolvency of our entitlement programs, House Budget Committee Chairman Paul Ryan told Lew.

"We cannot let the United States become another Greece or another Ireland or another Portugal," said Republican Representative Jerry Lewis.

(Additional reporting by David Lawder and Rachelle Younglai, Editing by Jackie Frank)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (50)
McBob08 wrote:
And how much are you cutting from the defence budget, Teabaggers? That’s the real cash cow that’s sucking up the lion’s share of the budget. A small cut to the defence budget will save the same amount of money as massive cuts to essential government programs that Americans really need. Don’t hurt the American people when they’re still hurting from the financial rape Wall Street gave them in 2009.

Feb 15, 2011 2:52am EST  --  Report as abuse
breezinthru wrote:
Re: Secretary of State:

The Secretary may well be right about cuts to the State Department budget. I am not privy to the details of the budget, but it makes intuitive sense to maintain diplomatic spending in areas where we are involved in conflict and in areas where there is a high potential for adverse events. That said, we could perhaps reduce staff in much of the rest of the world and cut back a little on spending in those areas.

I am also not privy to the details of the USAID budget, but I just dropped into their website and I approve of what is being done in Pakistan and Afghanistan. It appears to be a small amount of money well spent on illuminating a path to the future. Our soldiers anointed that path with their blood. Those brutal costs are more easily endured when a soldier doesn’t have to ask, “What good is coming from this? What the hell am I really fighting for?”

However, I think we should drastically cut spending tax money on things like medical care and food for much of the rest of the world. Each nation’s government is responsible for the welfare of its own citizens. Additional assistance should be the realm of charities and NGO’s. When that fails, there is now a new way for citizens to deal with those governments as Egypt and Tunisia have demonstrated.

I can see providing a little assistance, but real change requires citizens to be willing to do the heavy lifting.

Feb 15, 2011 6:14am EST  --  Report as abuse
nieldevi wrote:
Some loonies blow up a couple skyscrapers and you throw your whole economy, including the National security in the pot. Not to mention wasting billions on trying to keep people from buying pot. Good going Congress, you’re really watching out for us lowly peons.

Feb 15, 2011 6:19am EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.