Obama Pledges To Slash Deficit - After Increase

WASHINGTON -- Urging strict future restraint even as current spending soars, President Barack Obama pledged on Monday to dramatically slash the skyrocketing annual budget deficit as he started to dole out the record $787 billion economic stimulus package he signed last week.

"If we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road," the president warned, promising to cut the yearly deficit in half by the end of his four-year term. "We cannot simply spend as we please and defer the consequences."

He said he would reinstitute a pay-as-you-go rule that calls for spending reductions to match increases and would shun what he said were the past few years' "casual dishonesty of hiding irresponsible spending with clever accounting tricks." He called the long-term solvency of Social Security "the single most pressing fiscal challenge we face by far" and said reforming health care, including burgeoning entitlement programs, was a huge priority.

Wall Street seemed unimpressed by all the talk. The Dow Jones industrials dropped 251 points for the day.

Obama goes before Congress and the nation Tuesday night to make the case for his agenda and his budget plans, which the White House is to release in more detail on Thursday.

On Monday, he sought to prepare people for tough choices ahead.

He summoned allies, adversaries and outside experts to what the White House characterized as a summit on the nation's future financial health one week after triumphantly putting his signature on the gargantuan spending-and-tax-cut measure designed to stop the country's economic free fall and, ultimately, reverse the recession now months into its second year.

At the same time, federal regulators announced a revamped program to shore up the nation's banks that could give the government increasing ownership. It was the administration's latest attempt to bolster the severely weakened banking system without nationalizing any institutions, which the White House has said it does not intend to do.

Obama said there would be another summit next week on health care reform. "It's not that I've got summititis here," he added wryly.

By the president's account, the administration inherited a $1.3 trillion deficit for the current fiscal year from the Bush administration - that's the figure Obama says he'll cut in half - and the stimulus law, coupled with rescue efforts for ailing automakers, the financial industry and beleaguered homeowners will raise this year's red ink to $1.5 trillion.

The administration hopes to trim the deficit by scaling back Iraq war spending, raising taxes on the wealthiest and streamlining government.

"We are paying the price for these deficits right now," Obama said, estimating the country spends $250 billion - one in every ten dollars of taxpayer money - in interest on the national debt. "I refuse to leave our children with a debt that they cannot repay."

As an example of a purchasing process "gone amok," the president said he had ordered a thorough review of his new fleet of Marine One helicopters, now far over budget. He was asked about the fleet by former presidential rival John McCain at the end of the White House meeting.

"The helicopter I have now seems perfectly adequate to me," Obama said, to laughter. "Of course, I've never had a helicopter before. So, you know, maybe I've been deprived and I didn't know it."

Earlier, Obama met with Republican and Democratic governors who are poised to benefit from his unprecedented emergency economic package. He told the chief executives, attending a three-day National Governors Association meeting in Washington, that he would begin distributing $15 billion to their states within two days to help them with Medicaid payments to the poor.

The recession has strapped state budgets, in particular in regard to the Medicaid program that is jointly underwritten by states and the federal government. In total, states will eventually receive $90 billion for Medicaid from the new law.

One month into office as the economy continues its downward spiral, Obama is seeking to balance twin priorities: turning around dismal conditions with a huge injection of spending while lowering huge budget deficits. With his re-election race just a few years away, he also has an interest in avoiding being labeled as a big-government, big-spending Democrat.

The White House meetings opened a jam-packed White House week that includes a State-of-the-Union-style address to Congress Tuesday night and the president's first budget proposal on Thursday. A common thread: addressing current economic turmoil while controlling the country's long-term costs.

"This will not be easy," Obama told his White House audience, which included congressional leaders, 2008 GOP presidential nominee McCain, and Republican Sen. Judd Gregg of New Hampshire, who recently backed out as Obama's commerce secretary.

After Obama spoke, attendees broke into five groups to brainstorm how to address costly areas including military weapons, Social Security, health care and tax reform.

During one, Rep. Henry Waxman, D-Calif., said, "Our deficit really cannot be controlled until we figure out how to deal with health care costs." At another, House Republican leader John Boehner of Ohio proposed raising the Social Security retirement age to 70 over a number of years.

Afterward, Obama emphasized areas where he said there was agreement and consensus on moving forward in a bipartisan way, including that the country must ensure people have retirement security, that the tax process must be simplified and that the existing budgeting process isn't working. He also directed his team to pull together a final report from the sessions in 30 days.

Those were encouraging words that brought hopeful news to the head of the police union.

Tuesday night, Columbus Fraternal Order of Police President Jim Gilbert was in Washington, where he and other FOP presidents met with congressional leaders to push for public safety funds from the stimulus bill.

Of all the city cuts, eliminating an entire police recruiting class was one of the most controversial decisions.

"We're very hopeful that Columbus is going to be at the top of the list as far as availability to utilize the cops grant for hiring police officers, I know that the Mayor's administration is working very hard. He was just here last week," Gilbert said.

The mayor's office said Tuesday night that it is glad the FOP is lobbying as well.

Republican leaders continued their attacks on President Barack Obama's handling of the economy Tuesday, calling it irresponsible and certain to increase taxes and federal debt.

Responding to Obama's televised speech to a joint session of Congress, top Republicans said the president relies too heavily on spending, and not enough on tax cuts, to try to revive the gasping economy. They said they want to work with Obama, and sometimes blamed congressional Democrats more than him. But their criticisms were sharp and plentiful.

"The way to lead is not to raise taxes and put more money and power in hands of Washington politicians," said Louisiana Gov. Bobby Jindal, who gave the Republican Party's official response. The massive economic stimulus bill recently enacted by Obama and congressional Democrats, Jindal said, will expand the government, "increase our taxes down the line, and saddle future generations with debt."

"It's irresponsible," said Jindal, who is eyeing a presidential bid in 2012 and frequently cited his accomplishments in Louisiana.

The tone of the Republicans' response was in keeping with their nearly unanimous opposition to the $787 billion economic stimulus bill, which was backed by only three Republicans in the Senate and none in the House. Some Democrats and independents think the Republicans are blundering and misreading most Americans' sentiments about the need for massive government action to help the economy.

In the latest New York Times/CBS News poll, about three-fourths said Obama was trying to be bipartisan, and almost as many faulted the response of Republican officials, which was seen as politically motivated.

Despite such findings, GOP lawmakers say they believe they will be proven right in the long run.

House Republican leader John Boehner of Ohio said Tuesday that Republicans want to help Obama find "responsible solutions to the challenges facing our nation, but thus far congressional leaders in the president's own party have stood in the way."

Boehner, Jindal and other Republicans repeatedly accused Democrats of wanting to raise taxes, but the Obama-backed stimulus package has extensive tax cuts.

Jindal acknowledged that to some degree, Republicans deserved the drubbing they took in the last two national elections.

"You elected Republicans to champion limited government, fiscal discipline, and personal responsibility," he said. "Instead, Republicans went along with earmarks and big government spending in Washington."

Now, he said, "our party is determined to regain your trust."

Still, some GOP criticisms ignored the big deficits that occurred when George W. Bush was president and Republicans controlled the House and Senate.

"Washington shouldn't be spending money that we don't have," House Republican Whip Eric Cantor of Virginia said in his response to Obama's speech. He said Republicans will work with Obama, but they will not betray core principles.

Senate Republican Leader Mitch McConnell of Kentucky was rather conciliatory in his response to Obama's speech. "All Americans were proud eyewitnesses to history as an African-American president addressed a joint session of Congress for the first time," he said.

"We will have our differences" in working together, McConnell said. "Republicans believe the road back to prosperity is paved with greater personal freedom, not bigger government."

Taking advantage of his moment in the national spotlight, Jindal publicized a Web link Tuesday (http://www.bobbyjindal.com/sotu/) allowing respondents to receive early excerpts of his televised response, and to donate to his political organization. Jindal also collected their e-mail and postal addresses, which could prove handy in a presidential race.

Jindal opened his remarks by hailing Obama's racial breakthrough. "Like the president's father, my parents came to this country from a distant land," he said, referring to India.

In what sometimes sounded like a presidential campaign speech, Jindal said Washington should follow examples set by some state governments, including Louisiana's.

"Since I became governor," he said, "we cut more than 250 earmarks from our state budget" and "cut taxes six times, including the largest income tax cut in the history of our state."