Deficit control measures

The record-breaking deficit has aroused wide concerns. The Obama administration pledged to control deficit after the economy recovery stands on a firm footing.

Obama said new 2011 budget reflects "serious challenges" facing US and the country must tackle debt to ensure growth.

"In the long term, we cannot have sustainable and durable economic growth without getting our fiscal house in order," said Obama.

In order to control deficit, the administration proposed a three-year freeze on spending beginning in 2011 for many domestic government agencies excluding security and social safety net programs. It would save US$250 billion over the next decade by following the spending freeze with caps that would keep increases after 2013 from rising faster than inflation.

NASA's mission to return astronauts to the moon would be grounded with the space agency instead getting an additional US$5.9 billion over five years to encourage private companies to build, launch and operate their own spacecraft for the benefit of NASA and others. NASA would pay the private companies to carry US astronauts.

In addition to the freeze on discretionary nonsecurity spending, Obama is proposing to boost revenues by allowing the Bush administration tax cuts of 2001 and 2003 to expire at the end of this year for families making more than US$250,000 annually, which the administration projects would raise 678 billion dollars over the next decade. Tax relief for those less well-off would be extended.

The new budget also propose to levy a fee on the country's biggest banks to raise an estimated US$90 billion to recover losses from the government's US$700 billion financial rescue fund.

Also on the deficit front, the president has endorsed a pay-as- you-go proposal that passed the Senate last week. The President also promised to create a commission to recommend by year's end ways to trim the deficits.

Much of the spending surge over the past two years reflects the cost of the US$787 billion economic stimulus measure that Congress passed in February 2009 to deal with the worst economic downturn since the Great Depression.

The surge in the deficits reflects not only the increased spending but also a big drop in tax revenues, reflecting the 7.2 million people who have lost jobs since the recession began and weaker corporate tax receipts.

Although the Obama administration vowed to fight deficit, economists say that it will take longer time for the US government to return to fiscal discipline.

The Heritage Foundation, a Washington-based think tank, said that the Obama budget only means higher taxes, higher spending and more debt.

(Xinhua News Agency February 2, 2010)