Obama urges setting up of US deficit panel

US President Barack Obama called on the US Congress to create a bipartisan panel that would look at ways to rein in the country's soaring deficits.

Obama said in a statement on Saturday the country faced a "serious fiscal situation" that stemmed from the recession he inherited from the Bush administration and years of "failing to pay for new policies". The statement came ahead of Obama's State of the Union address, due on Wednesday, in which aides say he will make deficit reduction a major theme.

China, the biggest US foreign creditor, has been warning Washington to rein in the ballooning deficit. If the Obama administration fails to make headway, China and other creditors could demand higher rates for US Treasury bonds.

Democratic Senator Kent Conrad and Republican Senator Judd Gregg have been pushing legislation that would establish a panel to make recommendations on cutting the US budget deficit, which grew to $1.4 trillion in 2009.

If the commission were established, it would develop recommendations that would be put before the Congress. Lawmakers would have to consider whether to adopt the recommendations in full or reject them.

But Conrad, Chairman of the Senate Budget Committee, and Gregg, its ranking Republican, have been having trouble attracting enough support for the measure. So, Obama's endorsement gives a crucial boost to their proposal before the Senate votes on it on Tuesday.

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