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