Chillin' out till it needs to be funded
After a string of costly bailout and stimulus measures,President Obama will set a goal this week to cut the annual deficit at least in half by the end of his term, administration officials said. The reduction would come in large part through Iraq troop withdrawals and higher taxes on the wealthy.
The president inherited a deficit for 2009 of about $1.2 trillion, which will rise to more than $1.5 trillion, given initial spending from his recently enacted stimulus package. His budget blueprint for the 2010 fiscal year, which begins Oct. 1, will include a 10-year projection showing the annual deficit declining to $533 billion in the 2013 fiscal year, the last year of his term, officials said.
While that suggests a two-thirds reduction, exceeding Mr. Obama’s goal of at least half, advisers note that the current deficit as a starting point is inflated by one-time expenses to stimulate the economy.
Measured against the size of the economy, the projected $533 billion shortfall for 2013 would mean a reduction from a deficit equal to more than 10 percent of the gross domestic product — larger than any deficit since World War II — to 3 percent, which is the level that economists generally consider sustainable. Mr. Obama will project deficits at about that level through 2019, aides said.
In his weekly radio and Internet address on Saturday, Mr. Obama said his first budget was “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.”
“We can’t generate sustained growth without getting our deficits under control,” he added.
The president will propose to tax the investment income of hedge fund and private equity partners at ordinary income tax rates, which are now as high as 35 percent and could return to 39.6 percent under his plans, instead of at the capital gains rate, which is 15 percent at most.
Senior Democrats in Congress joined with Republicans in 2007 to oppose that increase. But with Wall Street discredited and lucrative executive compensation a political target, the provision could prove more popular among lawmakers.