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Obama Ready for 'Tough' Budget Choices

Sunday, 02 Jan 2011 01:16 PM

President Barack Obama is willing to make difficult choices on spending cuts when he unveils his budget next month, a senior aide said Sunday.

But White House economist Austan Goolsbee said it was important not to "skimp" on important investments like education.

"We are going to have to make, in the medium run, a series of tough choices, and the president's not afraid to do that, and I think you will see in his budget that he's willing to," Goolsbee told the ABC News program "This Week" in an interview.

A fight is looming as Obama prepares to unveil his annual budget proposal in mid-February. Republicans who won control of the House in November elections have vowed to roll back federal spending to 2008 levels, with exceptions for the elderly, U.S. troops and veterans.

In separate appearances on Sunday talk shows, some Republicans vowed to use a debate on raising the nation's statutory debt limit to pressure the Obama administration to reduce spending.

A vote on the debt limit is expected within the next few months. A failure by Congress to raise the limit could roil world bond markets.

"At this point I am not in favor of raising the debt ceiling," said Minnesota Republican Representative Michelle Bachmann.

"Congress has had a big party the last two years. They couldn't spend enough money and now they're standing back, folding their arms ... taunting us about how are you going to go ahead and solve this big spending crisis?" Bachmann said on CBS' "Face the Nation."

South Carolina Republican Senator Lindsey Graham told NBC's "Meet the Press" he would not support a higher debt ceiling unless spending is cut to 2008 levels.

"To not raise the debt ceiling could be a default of the United States on bond and Treasury obligations. That would be very bad for the position of the United States in the world at large," Graham said. "But this is an opportunity to make sure the government is changing its spending ways."


The debt ceiling vote gives Republicans some leverage in the budget debate but they run the risk of getting blamed if the issue stirs turmoil in world markets.

In an acknowledgment of that risk, incoming House of Representatives speaker John Boehner has said it would be the responsibility of Congress to deal with the debt ceiling "as adults."

Goolsbee said talk of not increasing the debt ceiling amounted to a "playing chicken" with the country's financial credibility. "We shouldn't even be discussing that. People will get the wrong idea," he said.

While signaling an openness to some budget cuts, Obama has also indicated he will defend what he sees as crucial priorities and has listed education and investment in research and development as among those.

"If you're going to go skimp on important investments that we need to grow, you're making a mistake," said Goolsbee, who is chairman of the White House Council of Economic Advisers.

The U.S. budget deficit came in at $1.3 trillion in 2010. Goolsbee said it was important not to "conflate" the short-term deterioration in the budget picture and long-term budget challenges. He blamed the short-run fiscal problems on the economic crisis that Obama inherited when he took office.

"The reason the deficit is big this year is because we're coming out of the worst recession since 1929. That's the reason. The longer-run fiscal challenge facing the country is important," he said.

Goolsbee said he saw some encouraging signs in the U.S. labor market, including a recent drop in claims for unemployment insurance.

The U.S. jobless rate, at 9.8 percent in November, was a key factor behind Democrats' mid-term election loses.

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President Barack Obama is willing to make difficult choices on spending cuts when he unveils his budget next month, a senior aide said Sunday. But White House economist Austan Goolsbee said it was important not to skimp on important investments like education. We are...

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