Obama: Economic Rescue Will Trump Deficit Fight

CHICAGO – The economy growing weaker, President-elect Barack Obama said Tuesday that recovery efforts will trump deficit concerns when he takes office in January. Yet he pledged a “page-by-page, line-by-line” budget review to root out unneeded spending.

The president-elect set no goals for reducing the federal deficit – now in record territory and headed ever higher – an obvious contrast to Monday’s announcement that he hopes to create a recession-busting 2.5 million jobs by 2010.

He spoke as he appointed Peter Orszag, currently head of the Congressional Budget Office, to be his own budget director.

Obama’s comments came at his second news conference in as many days, an unusual pre-inaugural burst of activity that he said reflected “the extraordinary circumstances” he will inherit on Jan. 20.

With his Electoral College landslide victory, Obama said he possesses a “mandate to move the country in a new direction, and not continue the same old practices that have gotten us into the fix we’re in.”

At the same time, the Democratic president-elect pledged to consult with Republicans and approach his administration with humility “and a recognition that wisdom is not the monopoly of any one party.”

Obama’s promise to be careful with a federal buck was placed in a larger context.

“As soon as the recovery is well under way, we need to set up a long-term plan to reduce the structural deficit and make sure we are not leaving a mountain of debt for the next generation,” he said.

The picture took on troubling new dimensions a few hours before he spoke when the Commerce Department reported economic activity declined at a rate of 0.5 percent in the three months ending in September.

Further underscoring weakness, Americans’ disposable income fell at an annual rate of 9.2 percent in the same period, the largest drop in records that date to 1947.

The federal budget deficit was a record $455 billion for the fiscal year that ended on Sept. 30, and is certain to be higher this year – possibly reaching $1 trillion – as the costs of a financial bailout and an economic stimulus are piled on top of smaller-than-expected tax receipts.

Against that backdrop, Obama said, “Budget reform is not an option. It is an imperative. We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness, or exist solely because of the power of a politician, lobbyist or interest group.”

As an example, he cited a report that from 2003 to 2006, millionaire farmers received crop subsidies totaling $49 million that they may not have been entitled to.

“If this is true, it is a prime example of the kind of waste I intend to end as president.”

To serve both his objectives of growth and careful spending, Obama said he hoped some of the funds spent to stimulate the economy could also lay the groundwork for longer-term economic health.

As an example, he said, “a smart job of investing in health care modernization” could help in both the short term and the longer run.

Some of the new spending will be more traditional, though, and Obama told one questioner he hoped to work with state and local governments to complete road and other projects already under way.

The president-elect’s office also announced he intends to meet next Tuesday in Philadelphia with the nation’s governors. As the economy sours, many states are being hard hit, and inevitably will turn to Washington for help meeting health care costs for the poor as well as for other needs.

Obama’s pledge to work with Republicans reflected his campaign rhetoric. His chief of staff, Rahm Emanuel, met last week with leading GOP lawmakers, and Obama has pledged to have at least one member of the opposition party in his Cabinet.

“I think what the American people want more than anything is just commonsense, smart government,” he said.

“They don’t want ideology, they don’t want bickering, they don’t want sniping. They want action and they want effectiveness.”

In addition to Orszag, Obama named Robert Nabors as deputy director of the Office of Management and Budget. Both jobs are subject to Senate confirmation.

Later in the day, Obama named Alyssa Mastromonaco to be his White House director of scheduling and advance, a task similar to the one she had in his campaign.

On Monday, the president-elect tapped New York Federal Reserve President Tim Geithner as his treasury secretary.

By BETH FOUHY and DAVID ESPO, Associated Press Writers

David Espo reported from Washington.

(Copyright 2008 by The Associated Press. All Rights Reserved.)