With the United States facing a record budgetary deficit, the US President Barack Obama today proposed to freeze government spending for three years beginning 2011.
"Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, medicare, medicaid, and social security will not be affected," Obama said in his State of the Union Address.
"But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t," he said and warned that he will enforce veto if necessary.
"We will continue to go through the budget line by line to eliminate programs that we can't afford and don't work. We've already identified $20 billion in savings for next year. To help working families, we will extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, investment fund managers, and those making over $2,50,000 a year. We just can't afford it," he said.
"Now, even after paying for what we spent on my watch, we will still face the massive deficit we had when I took office. More importantly, the cost of medicare, medicaid, and social security will continue to skyrocket. That's why I have called for a bipartisan Fiscal Commission, modelled on a proposal by Republican Judd Gregg and Democrat Kent Conrad," he said.
"This can’t be one of those Washington gimmicks that lets us pretend we solved a problem. The Commission will have to provide a specific set of solutions by a certain deadline. Yesterday, the Senate blocked a bill that would have created this commission," he said, adding that he will issue an executive order that will allow it to go forward.
"When the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason why we had record surpluses in the 1990s," he said.
"I know that some in my own party will argue that we can not address the deficit or freeze government spending when so many are still hurting. I agree, which is why this freeze will not take effect until next year, when the economy is stronger," Obama said.
"But understand – if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardise our recovery – all of which could have an even worse effect on our job growth and family incomes," he said.
"From some on the right, I expect we'll hear a different argument – that if we just make fewer investments in our people, extend tax cuts for wealthier Americans, eliminate more regulations, and maintain the status quo on health care, our deficits will go away."
"The problem is, that's what we did for eight years. That's what helped lead us into this crisis. It's what helped lead to these deficits. And we cannot do it again," he said.
Obama said at the beginning of the last decade, America had a budget surplus of over $200 billion.
"By the time I took office, we had a one year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program. On top of that, the effects of the recession put a $3 trillion hole in our budget. That was before I walked in the door," Obama said.
"Now if we had taken office in ordinary times, I would have liked nothing more than to start bringing down the deficit. But we took office amid a crisis, and our efforts to prevent a second Depression have added another $1 trillion to our national debt," he said.
"I am absolutely convinced that was the right thing to do. But families across the country are tightening their belts and making tough decisions. The federal government should do the same. So tonight, I'm proposing specific steps to pay for the $1 trillion that it took to rescue the economy last year," he said.
"Rather than fight the same tired battles that have dominated Washington for decades, it's time to try something new. Let's invest in our people without leaving them a mountain of debt. Let's meet our responsibility to the citizens who sent us here. Let's try common sense," he said.
"To do that, we have to recognise that we face more than a deficit of dollars right now. We face a deficit of trust – deep and corrosive doubts about how Washington works that have been growing for years. To close that credibility gap, we must take action on both ends of Pennsylvania Avenue to end the outsized influence of lobbyists; to do our work openly and to give our people the government they deserve," Obama argued.
