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Rahm Emanuel: Obama Will Cut Deficit
Thursday, November 19, 2009 10:32 AM
By: Dan Weil
MONEYNEWS.COM
White House Chief of Staff Rahm Emanuel says a long-term budget deficit reduction plan will be a major focus of President Obama’s January State of the Union address.
“It is foremost on his mind and the mind of the economic team,” Emanuel said of deficit reduction at a Washington, D.C. conference.
The deficit exploded to a record $1.4 trillion in the year ended Sept. 30, or about 10 percent of GDP.
And some predict it will soon rise as high as $2 trillion.
Even by 2019, the deficit will still total as much as 4 percent of GDP, according to the Office of Management and Budget (OMB).
The deficit has soared as the recession depressed tax revenue, the $787 billion stimulus package increased government spending and bailouts in the banking and auto industries did the same.
The Obama administration may have a rocky path to achieve its goals of boosting employment and cutting deficits at the same time.
That’s because many of the proposals to reduce the unemployment rate — 10.2 percent as of October — entail either increased government spending or lower tax revenue.
The OMB has proposed using some of the $210 billion unspent money in the $700 billion Troubled Asset Relief Program (TARP) for deficit reduction.
That idea has support among economists.
“Right now what we've got could turn into a $700 billion (congressional) slush fund,” Douglas Elliott of the Brookings Institution told The Wall Street Journal.
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