Barack Obama seeks sacrifices for future

Published on Wednesday 13 April 2011 17:06

President Barack Obama has laid out plans to slash US national debt by $4 trillion (£8.6tn) by 2023, calling on every American to "make sacrifices" for the sake of future generations.

In a bid to curb a soaring deficit of more than $14tn, the president yesterday proposed a series of spending cuts and an end to Bush-era tax relief for the rich. And if debt is still not shrinking by 2014, a "failsafe trigger" would be activated, allowing further swingeing cuts across the board.

In a highly-anticipated speech, the president told Americans: "We have to live within our means". He stated that in order to meet the fiscal challenge ahead everyone would have to share the burden.

Mr Obama added: "But we do not have to sacrifice the America we believe in. And as long as I'm president, we won't."

The president resisted calls from conservatives to drastically cut funding for Medicare and Medicaid, which provide health cover for the elderly and poor.

But in an overture to his opponents, Mr Obama said he would seek a total of $480 billion in efficiency savings from the two schemes by 2023.

The president is banking that a balance of $3 of spending cuts and interest savings for every $1 tax increase will be enough to form a political consensus in Washington.

But the decision to allow Bush-era tax cuts to expire is likely to be vehemently opposed by Republicans in Congress.

In his address, he defended the move stating: "At a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more."

The deficit debate in Washington comes on the back of a bruising budget stand-off last week which came close to triggering a government shutdown.

A failure to agree a solution to the US's growing deficit could be even more damaging.

Congress is due to vote in the coming weeks over whether to raise the limit on government debt above its current $14.3tn level - a ceiling it is perilously close to reaching.

House Republicans have indicated that they will not agree to raising the limit without concrete debt reduction plans being put in place first.

But unless the ceiling is increased by the end of July, the US risks defaulting on its obligations, treasury secretary Timothy Geithner has warned. Doing so would result in "Armageddon-like" consequences, the White House has said.

Economists have predicted that a government default would put the financial recovery into reverse and result in a return to recession and another banking crisis.

With so much at stake, it is highly unlikely Congress will fail to raise the debt limit. But a bitter debate is anticipated as Republicans attempt to gain further concessions.The president is hoping to avoid a stand-off. The White House has been keen to promote his plan as balanced and consensus-building. But in conceding ground on cuts, Mr Obama risks alienating the left of his party. At the same time, it is unlikely the plan goes far enough to get the support of many Republicans.