With Economy As Backdrop, Obama Hosts Meetings

President Barack Obama hosted two gatherings at the White House Monday: first the National Governors Association and then the president's own Fiscal Responsibility Summit. Both meetings were largely about the state of the economy and its effect on government spending and revenues.

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

MICHELE NORRIS, host:

And I'm Michele Norris. President Barack Obama today hosted an unusual afternoon conference on the nations' budget problems, billing as a summit meeting on fiscal responsibility. The president talked of hard choices and of tackling such thorny political problems as social security and runaway healthcare costs. That meeting followed in morning session with the nation's governors at the White House.

There the president defended the $787 billion economic stimulus package just signed last week. It's a package many governors welcome but some said would spend too much and stimulate too little. NPR's Don Gonyea reports from the White House.

DON GONYEA: It is an indication of the balance the president is trying to strike - moving fast to meet the immediate economic crisis, yet mindful that his actions now can shape the long term image of his presidency. So if last week was all about the need for a massive infusion of federal dollars into the economy, then this week it's about looking at ways to cut red ink from the federal deficit down the road. Eight years ago President Bush inherited a budget surplus. But President Obama today emphasized that he was not so lucky -inheriting instead a budget with a record $1.3 trillion in red ink for just one fiscal year.

President BARACK OBAMA: We cannot simply spend as we please and defer the consequences to the next budget, the next administration, or the next generation.

GONYEA: That president's Fiscal Responsibility Summit included more than 100 invitees from across the political spectrum. There were members of Congress, representatives from business, from universities, from labor unions and from think tanks. Mr. Obama pledged to change a long-time Washington practice of hiding big ticket items by keeping them off budget, or through other practices.

President OBAMA: Budgeting certain expenditures for just one year when we know we'll incur them every year for five or ten. Budgeting zero dollars for the Iraq war - zero - for future years, even when we knew the war would continue. Budgeting no money for natural disaster as if we would ever go twelve months without a single flood, fire, hurricane or earthquake.

GONYEA: Then the president made another pledge: To cut the annual deficit in half in his first term. After opening remarks, the participants spent the afternoon working in smaller groups. The White House described the summit as a chance to start the process of dealing with the deficit directly. And it also seemed to start another process leading to fundamental changes to the nation's healthcare system. At his daily briefing today the president spokesman, Robert Gibbs, was asked if the White House is prepared for the complexity and for the political fallout if it takes on programs like Medicare, Medicaid and social security. Gibbs answered by saying the key to the puzzle was healthcare.

Mr. ROBERT GIBBS (White House Press Secretary): If you're going to talk about Medicare and Medicaid, you're talking about the rising costs of healthcare in this country - that we've seen outstrip inflation sometimes more than double over the past 10 years.

GONYEA: And the White House sees a healthcare overhaul as a way to trim some of these other increasingly expensive programs. As he talked of fiscal restraint today, the president heard criticism that last weeks emergency economic package showed no such discipline. The National Governors' Association gathered at the White House this morning. Louisiana governor Bobby Jindal spoke to reporters.

Governor BOBBY JINDAL (Republican, Louisiana): Certainly, I think there could've been a very different stimulus bill written. There could've been a stimulus bill that was truly targeted and (unintelligible) focused on infrastructure, focused on a kind of tax credits that would've got investor moving into the private sector.

GONYEA: The president dismissed those critiques, describing them as merely political. But if that's what they are they won't be going away, as he turns to ever greater challenges on his own agenda.

Don Gonyea, NPR News, The White House.

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Obama Pledges To Halve Deficit In Four Years

President Obama pledged Monday to cut the country's soaring $1.3 trillion annual budget deficit in half by the time his term in office ends in 2013.

Speaking to lawmakers, business and labor leaders, and economic experts who had gathered at the White House for what was billed as a summit on fiscal responsibility, Obama said the U.S. cannot continue to sustain massive deficits — even as implementation begins of a $787 billion stimulus package that will add to the debt.

"If we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road," Obama said.

But Wall Street took little comfort in the Obama administration's plans to turn the economy around. The Dow Jones industrial average and the Standard & Poor's 500 index closed at the lowest levels in nearly 12 years amid worries that government action is not enough to pull the country out of recession.

The Dow fell 250.73 points to 7114.94. The S&P 500 dropped 26.71 points to 743.34, and the Nasdaq composite index skidded 53.51 points to 1,387.72.

As a means of improving the bottom line, Obama said he would eliminate no-bid contracts and tax breaks for companies that send jobs overseas. He also pledged to root out fraud and abuse in Medicare and eliminate waste in federal agencies.

The president said a team of advisers is going through the soon-to-be-proposed budget for the 2010 fiscal year line by line with the goal of eliminating waste and inefficiency. In the Agriculture Department alone, the White House budget team has identified ways to save more than $18 million, Obama said.

In addition, the president said he plans to reinstate the federal government's pay-as-you-go policy that was in place during part of the 1990s. Under that policy, new government spending had to be matched with spending cuts elsewhere or funded by new sources of revenue.

"The pay-go approach is based on a very simple concept — you don't spend what you don't have. This is the rule that families across this country follow every single day, and there's no reason why their government shouldn't do the same," Obama said.

At the end of the summit, Obama stressed that he wanted bipartisan cooperation in finding solutions to the country's fiscal problems. He invited Arizona Sen. John McCain — his Republican rival in the November presidential election — to offer a suggestion for cleaning up the economic mess.

McCain recommended looking at the procurement process and cost overruns in the Defense Department.

Vice President Joe Biden, who is overseeing implementation of the financial stimulus plan, said the road to fiscal health is going to be difficult. "I have always believed that in the toughest moments we are presented with the greatest opportunities as a nation," Biden told summit participants.

Earlier in the day, Obama announced that states will receive a disbursement of $15 billion this week from the economic stimulus package to help cover the cost of health care to the poor. State and municipal governments are struggling to cover Medicaid costs as more and more people lose their jobs — and their health care coverage.

"This Wednesday, our administration will begin distributing more than $15 billion in federal assistance under the recovery act to help you cover the costs of your Medicaid programs," Obama told the nation's governors at a meeting at the White House. The states' chief executives were ending a three-day conference of the National Governors Association.

Last week, Obama signed the $787 billion stimulus package into law. The plan aims to lift the country out of a 14-month recession by creating and saving 3.5 million jobs though a mix of tax and spending initiatives.

The president also announced Monday that Interior Department Inspector General Earl Devaney will serve as chairman of the Recovery Act Transparency and Accountability Board. Devaney's chief task will be to ensure that funds are not wasted.

From NPR and wire reports

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