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Tuesday, January 6, 2009

Obama predicts $1 trillion deficit 'for years to come'


President-elect Barack Obama warned Tuesday that the nation could face "trillion-dollar deficits for years to come" but vowed to pursue long-term budget changes as he presses for immediate new spending and tax cuts to jump-start the struggling economy.

Two weeks before he takes office, Obama said his budget aides told him that he will inherit huge deficits following the government's multibillion-dollar financial bailouts. He vowed to block pet projects sought by members of Congress, known as "earmarks," create an economic recovery oversight board and post details of all spending projects on the Internet.

"We're going to have to bring significant reform not just to our recovery and reinvestment plan, but to the overall budget process," Obama said after meeting with economic advisers at his transition office.

"We're going to have to stop talking about budget reform," he added. "We're going to have to totally embrace it."

Obama vowed again that he would block earmarks from the massive economic stimulus package now being drafted in Congress, which will include road and bridge projects and $300 billion in tax cuts. He made his remarks surrounded by aides including Peter Orszag, his choice for White House budget director, Treasury secretary nominee Timothy Geithner, and Lawrence Summers, his choice for National Economic Council director.

The president-elect did not specify the size of the stimulus package or of his first budget, which will be submitted to Congress in early February. He vowed to work with both parties in Congress and is "willing to make some difficult choices in how we get a handle on this deficit."

The president-elect's comments on earmarks came as the chairmen of the House and Senate appropriations committees unveiled new rules on how their panels will deal with earmarks.

Rep. Dave Obey, D-Wis., and Sen. Daniel Inouye, D-Hawaii, will require lawmakers to post on their websites all funding requests for special projects when they make them and explain the value of their project. In addition, all requests will be published earlier than previously required. Now, these requests will be outlined when they are considered by subcommittees, rather than at the full committee level.

Obey and Inouye also said they plan to hold the total cost of earmarks to less than 1% of discretionary spending.

In a related issue, Sens. Kent Conrad, D-N.D., and Judd Gregg, R-N.H., have proposed a special commission to develop spending cuts and tax hikes that would be voted up or down as a package. The model would be the commission set up by Congress to shut down military bases.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said Obama is saying the right things but faces a political challenge in meeting his goals for deficit reduction.

MacGuineas, whose organization forecast a trillion-dollar budget deficit last year, said it is easy to see Congress borrowing money for the stimulus and then "turning their attention elsewhere."

The only solution, she said, is a package of spending cuts and tax hikes, "and they're going to have to be big."