Sceptical Congress, Obama advisers clash on budget

WASHINGTON (Reuters) - US President Barack Obamas advisers told Congress on Tuesday it would have to take measures beyond Obamas $3.8 trillion budget proposal to cut stubborn deficits as the president headed to New Hampshire to pitch job creation plans to a recession-weary public. But even Obamas fellow Democrats on Capitol Hill doubted whether the White House budget released this week would succeed. The divergent messages underscored the challenge Obama faces as he prescribes short-term stimulus to boost the sluggish economy and long-term austerity measures to head off a potential debt crisis. As the recovery takes hold, we then must pivot and deal with the long-term debt. And the place where Id fault this budget is I dont see the pivot, said Senate Budget Committee Chairman Kent Conrad, a Democrat. The White House has proposed $100 billion to bring down the 10 per cent unemployment rate and a three-year freeze on non-defence spending to help reduce budget deficits that are projected to remain unsustainably high over the coming decade. Despite bipartisan gestures like the spending freeze and various tax cuts, Obama is likely to get little support from Republicans, who feel a wind at their backs after a surprise Senate victory in Massachusetts. Obama headed to the politically centrist state of New Hampshire to unveil a plan that would use $30 billion from the unpopular Wall Street bailout programme for a small-business lending fund to spur job growth. But hours before he spoke, that states Republican Senator, Judd Gregg, blasted the idea in a contentious hearing on Capitol Hill, demanding that the money be used instead to bring down record budget deficits. Its become a piggybank that adds to our deficit, adds to our debt and gets put on our childrens backs, Gregg told Peter Orszag, the White Houses top budget official. The White House projects a record $1.56 trillion deficit for the current fiscal year, which ends Sept. 30. That would be 10.6pc of gross domestic product, the highest since World War Two. The White House predicts deficits will fall to roughly 5pc in coming years as the economy improves, well above the 3 percent of GDP that economists consider sustainable. That 5pc of the economy is too high, Orszag said. A bipartisan process is necessary to get us the rest of the way there. That means Congress will have to do two things, Orszag said: pass healthcare reform and cooperate with a proposed bipartisan deficit-reducing commission. Both of those could be difficult. Both the Senate and the House have passed healthcare reform bills that the White House believes would bring skyrocketing medical costs under control, but the legislation has stalled after Democrats lost their Senate supermajority in the Massachusetts election last month. Even if all goes according to plan, the White House still forecasts US public debt rising above 71pc of GDP by 2013, up from 53pc in 2009 - levels that could spook investors. According to AFP, US lawmakers Tuesday unveiled a draft bill to block any public funding for the trial of Guantanamo detainees accused of plotting the September 11 attacks within the US federal court system. Republican lawmakers Frank Wolf and Lindsey Graham joined forces to introduce legislation which would explicitly block this dangerous and wasteful trial from any domestic civilian court, Wolf said. They also won support from Democrats Jim Webb and Blanche Lincoln, as well as independent senator Joe Lieberman. If approved, the legislation would stop the Justice Department from using public funds to try the alleged mastermind of the 2001 attacks, Khaled Sheikh Mohammed, and his four co-accused, in the domestic US courts

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