SEOUL President Barack Obama, in a clear message to other leaders at the G20, said on Thursday that the best way to control the massive U.S. budget deficit was to help the economy grow faster.
"The single most important thing we can do to reduce our debt and our deficits is to grow," Obama said in his first public response to bold early recommendations from a White House debt panel that was quickly attacked by U.S. lawmakers.
Obama has been forced to defend U.S. policies blamed for pushing up the U.S. budget deficit, while other Group of 20 partners, such as Britain and Germany have embarked on harsh spending cuts.
U.S. officials say this is exactly the wrong thing to do while a global economic recovery is still fragile, and Obama has stoutly defended a decision by the U.S. Federal Reserve to print another $600 billion to spur U.S. growth.
The Fed provoked unusually blunt public German complaints that the move would hurt the dollar, and was therefore a disguised form of trade protectionism -- a diagnosis Obama, and U.S. Treasury Secretary Timothy Geithner, both flatly reject.
However, calls for U.S. fiscal austerity have resonated strongly with voters back home, who slammed his Democrats in congressional elections last week and handed control of the U.S. House of Representative back to Republicans.
Opinion polls showed voters were anxious over a U.S. deficit of $1.3 trillion this year, which is set to rise sharply in the years ahead as more Americans reach retirement age and begin drawing government benefits.
Highlighting a cherished Republican goal to extend Bush-era tax cuts for wealthier Americans, Obama said modest increases in economic activity could yield massive fiscal benefits.
"We increase our economic growth by 1 percentage point, and over time that could have as much of an impact as completely eliminating the Bush tax cuts," he said.
Tax cuts for American families earning more than $250,000 a year are due to expire at the end of December unless they are extended by Congress.
Obama-appointed fiscal panel co-chairmen Erskine Bowles and Alan Simpson floated proposals on Wednesday that they said would bring $4 trillion in deficit reduction through 2020.
Obama, who refused to comment on the report until the final version was on his desk, said the debate had been distorted during the midterm congressional election campaign and called for a measured, careful debate on the issues.
"Before anybody starts shooting down proposals, I think we need to listen, we need to gather up all the facts. I think we have to be straight with the American people," he said during a press conference with South Korean President Lee Myung-bak on the sidelines of the G20 summit.
The two commission heads called for cutting benefits and raising the retirement age for Social Security pensions, as well as setting limits on the popular Medicare program for the elderly and disabled, cutting payments to drugmakers and giving more power to a health cost-control board.
Fourteen of the 18-strong panel must endorse the final report, due in December, before it can go to the U.S. Congress for a vote.
Remarks from some panel members distancing themselves from its preliminary proposal show it may not get as far as to lawmakers, let alone through Congress where opposition could b its preliminary proposal show it may not get as far as to lawmakers, let alone through Congress where opposition could b e fierce.
Obama assured he was prepared to take tough decision, provided the political costs were evenly shared.
"I set up this commission precisely because I'm prepared to make some tough decisions. I can't make them alone. I'm going to need Congress to work with me," he said. "The only way to make those tough choices historically has been if both parties are willing to move forward together.
(Editing by Tomasz Janowski, G20 Newsroom)