President Barack Obama wants to slash the ballooning deficit in half by 2013, US officials said on Saturday, after massively increasing public spending to stem the worst economic crisis in decades.
Obama will outline his ambitious goal when he hosts a summit at the White House on Monday on fiscal responsibility and later in the week when his administration presents a summary of its first budget, for the 2010 fiscal year.
With tens of thousands of Americans losing their jobs in the midst of a global economic meltdown, Obama has said fixing the US economy is his top priority. He has acknowledged that his success or failure in that will define his presidency.
"We can't generate sustained growth without getting our deficits under control," Obama said in his weekly radio address in which he also announced immediate implementation of tax cuts for 95 per cent of Americans as part of the effort to stimulate the economy.
An administration official said Obama was proposing to cut the deficit, which private economists project will rise to $1.5 trillion this year, through a mixture of tax increases on wealthier Americans and spending cuts.
"The deficit this administration inherited was $1.3 trillion or 9.2 per cent of GDP. By 2013, the end of the president's first term, the budget cuts the deficit to $533 billion or 3.0 per cent of GDP," the official told Reuters on condition of anonymity.
"Most of the savings will come from winding down the war in Iraq, increased (tax) revenue from those making more than $250,000 a year, and savings from making government work more efficiently and eliminating programs that do not work," the official said.
The United States spent about $190 billion on the wars in Iraq and Afghanistan in 2008. Obama has pledged to withdraw US combat troops from Iraq within 16 months while ramping up the US military effort in Afghanistan.
Since being sworn into office on January 20, Obama has sought to reassure Americans that his government is tackling the economic crisis boldly and swiftly - holding near-daily events to announce measures to stem mortgage foreclosures, prop up failing banks, rescue the ailing auto industry and drive his stimulus package through Democratic-led Congress.
The measures have received a mixed early reaction from gloomy financial markets uncertain whether they will succeed in arresting the downward economic spiral.
BUSH TAX CUTS
A second administration official confirmed a Washington Post story that said Obama would propose boosting tax collection from about 16 per cent of the economy this year to 19 per cent in 2013, while federal spending would drop from about 26 per cent of the economy to 22 per cent in the same period.
He said Obama would let tax cuts implemented by his predecessor George W. Bush for Americans earning more than $250,000 expire on schedule at the end of 2010, when the tax rate would rise from 35 per cent to more than 39 per cent.
Obama told Americans in his radio address it was vital to get "exploding deficits under control as our country begins to recover."
"On Thursday I'll release a budget that's 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," he said.
Obama has invited business and union leaders, academics and lawmakers to a summit on Monday to discuss ways of cutting the deficit. That will be followed by an address to a joint session of Congress on Tuesday in which he said he would outline "our urgent national priorities."
In early January, just a few weeks before Obama took office, the nonpartisan Congressional Budget Office projected that the budget deficit would soar to $1.2 trillion for the current 2009 fiscal year that ends September 30.
But that figure excluded the recently passed $787 billion stimulus package, a combination of tax cuts and spending on infrastructure projects over more than two years.
Private analysts expect the impact of the stimulus package and other spending to counter the economic downturn will push the deficit to $1.5 trillion or more this year. That would be more than triple the $455 billion deficit recorded in 2008.
"Over time, the budget deficit will make it harder for our economy to grow and create jobs. That's why the president's budget for FY [fiscal year] 2010 puts us on the path to cut the deficit he inherited on January 20, 2009, in half by the end of his first term," an administration official told Reuters.
Earlier on Saturday, Obama said the US Treasury will implement tax cuts for 95 per cent of Americans enacted as part of the $897 billion stimulus package, fulfilling a campaign pledge he hopes will help jolt the economy out of recession.
"I'm pleased to announce that this morning the Treasury Department began directing employers to reduce the amount of taxes withheld from paychecks, meaning that by April 1st, a typical family will begin taking home at least $65 more every month," Obama said.