President-elect Barack Obama vowed Wednesday to tackle Social Security and Medicare spending as this year’s deficit was projected to reach $1.2 trillion and with Congress preparing to run that figure even higher with its economic recovery package.
Mr. Obama didn’t say how he would control the two major entitlement programs, instead promising details in February. But even raising the issue was a bold move, coming just four years after his own party helped block President Bush’s Social Security reform efforts.
“We expect that discussion around entitlements will be a part, a central part, of those plans,” Mr. Obama told reporters at a brief press conference in Washington called to announce his pick for a chief accountability officer, a new position designed to scour the federal budget for failed programs and wasteful spending.
The Congressional Budget Office announced a projected fiscal 2009 deficit of $1.2 trillion even if Congress doesn’t enact any new programs. But Mr. Obama and congressional leaders already have called for a spending bill totaling nearly $1 trillion more and spread over two years, arguing that’s the best way to create jobs.
Republicans and Democrats on Capitol Hill were staggered by the deficit number, with some calling for renewed restraint and others placing blame.
About the only person who was silent on the deficit projection was Mr. Bush, who took office facing a surplus but who saw spending balloon and the country notch the highest deficits on record.
The White House referred calls about the deficit to its Office of Management and Budget, which did not issue a public comment on the new projection.
Democrats said the president should own up to what they said was his legacy.
“I’ll give President Bush the gold, the silver and the bronze for winning the three largest deficits in this nation’s history before this one,” said Sen. Kent Conrad, North Dakota Democrat. “But this goes in its own category — this is truly olympian.”
Mr. Obama and Congress are trapped between a desire to get spending under control and a need to boost the economy. They have concluded in the short term that stimulating growth will require more spending on job creation and national infrastructure such as bridges and school facilities.
Mr. Obama will make that case in a speech Thursday at George Mason University, where he will detail what has been dubbed the American Recovery and Reinvestment Plan. The details of his plan, which aims to save or create more than 3 million jobs, are still in the congressional negotiation phase.
Some Republicans are warning that the spending must be limited to one-time expenses that don’t add to deficits in the long term, while other Republicans are arguing for tax cuts rather than more spending to spur the economy.
Budget hawks and financial analysts warn that an $850 billion package could destabilize the financial markets if Mr. Obama and Congress don’t also prove they want to tackle the deficit.
Mr. Conrad, the chairman of the Senate Budget Committee, and Sen. Judd Gregg of New Hampshire, the committee’s top Republican, issued a joint statement this week saying long-term entitlement reform must be coupled with immediate spending in order to retain the confidence of world financial markets.
“As we address the economy, we need to simultaneously signal to the markets that we are serious about restoring fiscal discipline and putting our budget back on a sound long-term path. Linking these short-term and long-term plans is the best way to instill global confidence in the U.S. financial system,” they said.