* Deficits contribute to drop in Obama's popularity
* White House says high debt is legacy of Bush
* Momentum grows for bipartisan panel to tackle problem
By Caren Bohan and Andy Sullivan
WASHINGTON, Jan 5 President Barack Obama is
expected to signal resolve in the New Year to tame record-high
U.S. budget deficits but many experts doubt Washington has the
stomach for the tough medicine needed to fix the problem.
Pressure over government deficits is growing for Obama,
whose approval ratings have fallen below 50 percent. Pollsters
say anxiety over the deficit of $1.4 trillion in the fiscal
year ended Sept. 30 is one factor contributing to the drop.
Republicans are trying to paint Obama as a big spender,
though the White House counters that the lion's share of the
deficits are a legacy of President George W. Bush's tax-cutting
policies and the economic crisis that erupted under the
China, the biggest U.S. foreign creditor, has been loudly
warning Washington to get its fiscal house in order.
For now, financial markets are showing little sign of
alarm. Investors remain willing to loan the U.S. government
money at low interest rates but experts warn that if that were
to change, it could happen suddenly.
One idea gaining traction on Capitol Hill is a "fiscal task
force" to tackle the highest deficits since World War Two.
The commission, made up of both Democrats and Republicans,
would have special powers to recommend spending cuts and tax
increases that would then get voted on in Congress.
The White House is also mulling a task force of its own,
but it would have less power than the version being pushed by
Democratic Senator Kent Conrad and Republican Senator Judd
Gregg, both fiscal hawks.
WHITE HOUSE TALKING TO SENATORS
The White House would not say whether it backs Conrad and
Gregg's proposal, but a spokesman for Obama's budget office
said the administration was talking to them about the idea.
"We share these senators' concern with the fiscal situation
of the nation," said White House Office of Management and
Budget press secretary Kenneth Baer.
"And as we move forward with the (fiscal year) 2011 budget
process, we are talking with them and leaders on Capitol Hill
about how we can best put the country on firm fiscal footing."
Obama focused his 2009 domestic agenda around a quickly
enacted $787 billion economic stimulus plan and a
still-unfinished effort to overhaul the healthcare system.
Although his top near-term aim is to bring down the U.S.
unemployment rate of 10 percent, aides have said deficit
reduction will be a key theme of Obama's State of the Union
address planned for late January or early February.
He will give specifics in his proposed 2011 budget to be
unveiled next month.
Analysts say it may be in Obama's interests to back a
commission -- if for no other reason than to push the job of
proposing politically painful remedies onto the panel rather
than offering specifics himself.
Some said the idea holds promise but many were cautious.
"In one respect, the moon, the stars and the planets are
all aligning properly for some sort of deficit reduction
effort," said Stan Collender, a long-time budget watcher at
"So under those circumstances, a commission might have a
certain amount of momentum that it wouldn't otherwise have."
Still, Collender noted, any bipartisan agreement on deficit
reduction faces huge obstacles in 2010, a congressional
election year in which majority Democrats are seeking to fend
off a challenge to their dominance from Republicans.
Even with a commission, any bipartisan deal would require
spending cuts, which many Democrats would be reluctant to
embrace, and tax increases, which Republicans oppose.
"I don't see that consensus right now," said James Horney
of the Center on Budget and Policy Priorities, a liberal think
"It seems clear that the Republican leadership in Congress
and other Republicans around the country at this point would
absolutely be unwilling to discuss revenues as part of a
deficit reduction package," he said.
The Senate is expected to vote on the debt commission on
Jan. 20, as an amendment to a measure to raise the national
debt limit. Boosting the chances of its passage, Senate leaders
from both parties reached agreement on the measure before they
left for their holiday break late last month.
But key House Democrats, including Speaker Nancy Pelosi,
are cool to the idea as they worry it will undercut their
Conrad, chairman of the Senate Budget Committee, is talking
with House leaders and the White House and a compromise could
While visiting China in November, Obama gave his starkest
warning yet on the budget, telling Fox News the United States
risked a double-dip recession if the debt piled up too high.
"The numbers do scare people. Financial markets and
international lenders in particular, are not amused," said
Douglas Holtz-Eakin, a former director of the Congressional
Holtz-Eakin, who advised Republican Senator John McCain in
the 2008 presidential election, was disappointed that the
budget deficits were not a bigger political issue then. He sees
some signs that is changing but noted that in 2010 there is a
"crowded field" of issues on voters minds.
(Editing by Simon Denyer and Mohammad Zargham)