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Obama faces test of political, economic artistry

President seeks to bolster economy via spending, but also cut budget deficit

WASHINGTON - President Barack Obama moves into a week that will test his political and economic artistry as he pushes forward with plans to spend unprecedented hundreds of billions to rescue the collapsing economy while also promising to cut America's record budget deficit.

The new administration will outline spending cuts to halve the federal budget deficit in four years by cutting Iraq war spending, raising taxes on wealthy Americans and turning efficiency experts loose on government outlays, an administration official said on Saturday.

The economic pincers gripping Obama's presidency will only be compounded by political dislocation. Republicans, especially the most conservative lawmakers and state governors, already are loudly attacking administration spending plans designed to put a floor under the failing economy.

But cutting the budget — a move Obama telegraphed in his weekly message to Americans on Saturday — is sure to stir anger among liberal Democrats who are determined to restore robust government spending on social programs.

"We can't generate sustained growth without getting our deficits under control," Obama said in his weekly radio and Internet address. His budget will be "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."

Obama's proposal for the 2010 fiscal year that begins Oct. 1 projects that the estimated $1.3 trillion deficit he has inherited from former President George W. Bush will be halved to $533 billion by 2013. That's a difference of 9.2 percent of the overall economy now vs. 3 percent in four years. How well he meets that goal is likely to be an issue in the 2012 presidential campaign.

First speech to Congress The president was expected to outline some broad themes of his budget request Monday at a White House summit on fiscal policy and touch on it during his first speech to Congress on Tuesday night. An official summary of the spending plan goes to Congress on Thursday, barely a week after he signed his $787 billion economic stimulus plan into law.

He will try to bend a handful of rebellious Republican governors to his side at a White House dinner Sunday night and a meeting Monday morning with participants in the annual meeting of the National Governors Conference.

Obama's budget also is expected to take steps toward his campaign promises of establishing universal health care and lessening the country's reliance on foreign oil.

The administration official, who spoke on the condition of anonymity because the president has not yet released his budget, said Obama hopes to achieve his deficit-reduction goal by generating savings as he follows through on three core campaign promises over the next four years.

Obama has pledged to wind down the Iraq war by withdrawing most combat troops within 16 months of taking office. He also has said he would let the temporary Bush tax cuts expire in 2011 for people making more than $250,000 a year, effectively raising their taxes. And, he has vowed to scale back spending and improve government efficiency by eliminating programs that do not work.

The budget projections suggest that Obama has not retreated from those priorities in his first month in office as he concentrated on lobbying for the economic stimulus plan and rescuing the housing, auto and financial sectors.

A gargantuan task Cutting the deficit by half in just four years would be a gargantuan task at any time, let alone in a period marked by a dangerously declining economy. The recession is well into its second year.

His $787 billion stimulus measure is meant to create jobs but certainly will add to the nation's skyrocketing national debt. He also is implementing the $700 billion financial sector rescue passed last fall on former President Bush's watch. About $75 billion of it is being used toward Obama's plan to help millions of homeowners facing foreclosure.

At the same time, the administration is weighing requests by General Motors Corp. and Chrysler LLC for an additional $21.6 billion. The ailing automakers already have received a combined $17.4 billion in federal loans.

The nonpartisan Congressional Budget Office says that this year's budget deficit will be at least a record $1.2 trillion — about two times that of the year before. That total includes the financial bailouts and rescue plans Congress approved since last Oct. 1, the start of the government's budget year, but not Obama's hefty stimulus package that's now law.

Some private economists are forecasting that the budget deficit for the current year will hit $1.6 trillion. And, the Treasury Department has said that the recession and massive costs for the $700 billion financial bailout have pushed the federal deficit to an all-time high for the first four months of the budget year.

Obama's budget director, Peter Orszag, told lawmakers recently that even after the economy recovers, annual deficits could reach $750 billion or so and steadily exceed $1 trillion by the end of the next decade. And, Obama himself has said, without decisive action, "trillion-dollar deficits will be a reality for years to come."

Also Saturday, the White House announced that British Prime Minister Gordon Brown is coming to the Washington next month for talks with Obama.

The meeting is set for March 3. The leaders plan to discuss the global financial crisis, an economic summit set for London in April and the war in Afghanistan, as well as NATO's upcoming 60th anniversary summit.

Obama is hosting another foreign leader — Japanese Prime Minister Taro Aso — on Tuesday.