WASHINGTON (Reuters) - President Barack Obama pledged on Monday to cut the ballooning U.S. budget deficit by half in the next four years and said the country would face another economic crisis if it did not address its debt problems soon.
Obama, whose month-old administration has pushed through a $787 billion economic stimulus package to try to jolt the country out of recession, said the need for massive spending now did not mean U.S. budget problems could wait until later.
“If we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road,” Obama told participants at the opening of a White House summit on “fiscal responsibility.”
Leaders from business, labor, and both political parties attended the White House meeting, which focused on ways to improve the U.S. budget outlook by cutting healthcare costs, reforming military procurement and revamping tax policies.
Obama, who rolls out his first budget on Thursday, stressed the urgency of acting quickly and emphasized he inherited a $1.3 trillion deficit with interest payments in 2008 alone at $250 billion -- three times more than the country spent on education.
“We cannot and will not sustain deficits like these without end,” he said. “Today I‘m pledging to cut the deficit we inherited by half by the end of my first term in office.”
Obama, a Democrat, took over from former Republican President George W. Bush last month. His current term in office goes through January 2013.
The president highlighted healthcare reform -- one of his key promises during the 2008 campaign -- as crucial to bolstering the country’s fiscal position.
He announced a healthcare summit would take place next week and said Republican and Democratic participants on Monday agreed action on the issue was needed this year.
In another potential budget cut, Obama cast doubt over an expensive project by Lockheed Martin Corp to replace the presidential helicopter.
“The helicopter I have now seems perfectly adequate to me,” he said to laughter from the audience that included former Republican presidential rival John McCain, a fierce critic of defense procurement policies.
Obama needs to reassure markets he has a responsible attitude toward the deficit and wants to show fiscal discipline that will keep interest rates down and the economy in shape.
The Dow Jones industrial average and S&P 500 fell to 12-year lows on Monday as investors dumped shares on uncertainty about the U.S. government’s ability to stabilize the financial system.
White House spokesman Robert Gibbs sought to play down fears of bank nationalizations, saying Obama favored leaving banks in private investors’ hands.
“The president believes that a privately held banking system regulated by the federal government is the best way to go,” Gibbs told a regular briefing.
The idea of nationalizing banks is anathema to much of the U.S. public and many politicians, who describe it as socialism that flies in the face of a free-market tradition.
Although his administration has focused its energies on pulling the United States out of recession and addressing the financial sector problems that sparked it, Obama also wants to make good on campaign promises such as extending healthcare benefits to uninsured Americans and fighting climate change.
His budget director, Peter Orszag, said reducing healthcare costs was critical to easing U.S. economic ills.
“The single most important thing we can do to put the nation back on a sustainable (fiscal) course is slow healthcare costs,” he said.
Participants at the meeting divided up into working groups to discuss ways to deal with healthcare, the Social Security entitlement program and federal contracting.
Afterward, they bantered with Obama, who urged leaders to set aside politics to address the budget issue.
Prominent Republicans including House of Representatives Minority Leader John Boehner attended. Boehner and other Republicans, who have lambasted the president’s stimulus package, called for a federal spending freeze.
“President Obama has called for both parties to get serious about fiscal responsibility,” Boehner said in a statement.
“With our budget deficit potentially reaching $3 trillion this year, Republicans stand ready to work with him, and we believe we should start right now.”
Republican Senator Orin Hatch, who did not attend the summit, called it a photo opportunity.
“Convening groups to talk about deficits and holding a photo-op isn’t going to pay off our debts,” he said in a statement.
additional reporting by Steve Holland, Ross Colvin, Donna Smith, Matt Spetalnick and Andy Sullivan; editing by David Wiessler and Mohammad Zargham