Gregg: Deficits could bring bankruptcy

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By Tom LoBianco

One of President Obama's top economic advisers said massive increases in domestic spending can't wait - even as federal spending continues to mount, with new plans to spend $1 trillion to buy toxic bank assets and an independent report that the White House undershot the nation's debt by $2.3 trillion.

But Republican lawmakers have become increasingly skeptical of Democratic spending plans, presenting some of their most dire forecasts Sunday.

Sen. Judd Gregg, New Hampshire Republican and one-time Obama pick to lead the Commerce Department, said the combination of new spending could cause the nation to go bankrupt.

Christina Romer, chairman of the White House Council of Economic Advisers, said Mr. Obama's domestic budget priorities, including major reforms in health care, education and the environment, must be kept in the budget as Congress takes control of the spending document.

“All three of those [Mr. Obama] said are just too big to wait,” she said on “Fox News Sunday.”

As Congress weighs Mr. Obama's first budget, with $1.5 trillion in deficit spending, Republicans and moderate Democrats have become wary of the White House's long-term plan, which includes an ambitious overhaul of health care and a plan to raise nearly $2 trillion through a greenhouse gas emission measure.

“I think maybe the president's trying to take on too much,” Sen. Charles E. Grassley, Iowa Republican and ranking member of the Senate Finance Committee, said on CBS' “Face The Nation.”

“You know, he wants to emulate Franklin Roosevelt.”

Mr. Gregg analogized that what the new administration and Democratic Congress have been doing is akin to a pilot noticing the low-fuel light coming on in a plane but deciding to casually fly on for two more hours.

“The practical implications of this is bankruptcy for the United States,” Mr. Gregg said on CNN's “State of The Union” on Sunday. “There's no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued.”

Mr. Obama plans to detail Monday his plan to release an additional $1 trillion to purchase bank assets thought to be worthless because of bad mortgages. Last week, the Congressional Budget Office (CBO) determined that the president's budget proposals would result in $9.3 trillion in deficits over the next decade, $2.3 trillion more than the White House estimated over the same period of time.

The trillion-dollar plan aims to free up credit markets by providing low-interest loans and by auctioning off toxic assets.

Sen. Susan Collins, Maine Republican and a key ally of the Democrats when she negotiated passage of the $787 billion stimulus package at the start of the year, said she had grave concerns about Mr. Obama's budget proposal.

“It brings our debt levels to an unprecedented level,” Mrs. Collins said Sunday on “Face The Nation.” “It would double the public debt in five years, triple it in 10 years, the highest percentage of [gross domestic product] since after World War II, CBO says, by the year 2019, 82 percent of [Gross Domestic Product]. ... That is not sustainable. It poses a threat to the basic health of our economy.”

White House economic advisers have been regular guests on the Sunday morning shows since Mr. Obama's inauguration, defending, by turns, the stimulus plan, additional corporate bailout funds and the president's budget proposal.

“We don't expect these folks to sign on the dotted line,” Vice President Joseph R. Biden Jr.'s chief economist, Jared Bernstein, said on CBS. “What we do expect and what we are going to stand very firm on, because this president, this vice president have made this clear, that there are these priorities that brought them to the dance here: energy reform, health care reform, education, all done in the context of a budget that cuts the deficit in half over our first term.”