Newsflash


By Hans Nichols and Nadine Elsibai

Feb. 22 (Bloomberg) -- President Barack Obama plans to increase taxes on the wealthy and cut spending for the war in Iraq as part of a plan to slash the U.S. budget deficit to $533 billion by the end of his first term, according to an administration official.

Obama wants to reduce the deficit because he’s concerned that over time, federal borrowing will make it harder for the economy to grow and create jobs, said the official, speaking on the condition of anonymity.

The deficit Obama inherited on taking office last month was $1.3 trillion. The administration is scheduled to hold a so- called fiscal-responsibility summit at the White House tomorrow, with about 130 people invited, including about 50 members of the House and Senate from both parties. An overview of Obama’s budget proposal for the 2010 fiscal year, which begins Oct. 1, will be released Feb. 26.

“We have been on an incredible spending spree,” Senate Minority Leader Mitch McConnell said today on CNN. “So I think it’s timely that the president’s having a meeting at the White House tomorrow to talk about the deficit because we’re spending money at a very, very rapid pace, far beyond anything in history.”

Most of the savings will be realized from increased revenue from Americans making more than $250,000 a year and winding down the war in Iraq, said the official. The New York Times said yesterday Obama will propose letting President George W. Bush’s tax cuts for the wealthy lapse in 2010.

Barbour Objections

“I don’t think there’s an economist in the United States that thinks when you’re trying to get out of a recession and to create jobs, you ought to raise taxes,” Mississippi Governor Haley Barbour, a Republican, said on CNN’s “State of the Union” program today.

Pennsylvania’s Democratic Governor Ed Rendell disagreed, saying on “Fox News Sunday” that the idea that “raising taxes on the richest people” will harm the economy is “rubbish.” He spoke in an interview on Fox News Sunday.

“We heard these same arguments when Bill Clinton raised taxes on the richest Americans, and guess what? He got rid of the deficit,” Rendell said.

To increase revenue, Obama will also propose taxing the investment income of hedge-fund and private-equity partners at ordinary tax rates, which are now as high as 35 percent and may rise to 39.6 percent under the administration’s plan, the Times reported yesterday. They are currently taxed at the capital- gains rate of as much as 15 percent.

‘Kick the Can’

Obama promised during the campaign that he would slash federal programs that weren’t working. “The president has said he can’t kick the can down the road anymore,” Kenneth Baer, spokesman for the White House budget office, said last week.

The $1.3 trillion deficit Obama inherited equals 9.2 percent of gross domestic product, said the administration official. The administration’s budget proposal cuts the deficit to 3 percent of GDP by 2013, at the end of Obama’s first term.

Obama yesterday talked about the importance of reining in the ballooning federal deficit in his weekly address. He said the Treasury Department will begin ordering employers today to cut taxes taken from workers’ paychecks as part of his effort to pull the economy out of a recession.

The president said a “typical” family will start getting at least an extra $65 a month by April 1 as a result of the $787 billion stimulus package he signed into law this week. He said the measure is only a “first step.”

Help for Homeowners

The president has also pledged $275 billion to help struggling homeowners avoid foreclosure and plans to announce measures to stabilize banks. Companies from General Motors Corp. to Alcoa Inc. are slashing jobs and cutting production as the recession threatens to become the worst slump in the postwar era.

Government reports this week are likely to show sales of new homes plunged to a record low in January while durable goods orders dropped for a sixth month, economists said.

A Feb. 26 Commerce Department report will show new-home sales fell to 324,000 on an annual basis, according to the median estimate of economists surveyed by Bloomberg News. The same day, the department may report demand for goods meant to last several years dropped 2.5 percent.

A surge in foreclosures and plummeting demand for homes has depressed prices, sending the S&P/Case-Shiller 20-city home price index down 18.3 percent in December from a year earlier, according to a separate Bloomberg survey. Meanwhile, shrinking household worth pushed auto sales in January to the lowest level in more than 26 years, and factories are scaling back production as demand from consumers and businesses erodes.

For Related News and Information:

To contact the reporter on this story: Hans Nichols in Washington at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Last Updated: February 22, 2009 10:27 EST


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Home arrow Blog arrow Obama takes tougher line on oil spill
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Thursday, 20 May 2010

Obama takes tougher line on oil spill

Obama administration directed more fire against BP, ordering it to provide daily updates on its efforts to contain the spill

Barack Obama

Barack Obama delivers at the White House in Washington. The Obama administration directed more fire against BP tonight. Photograph: Jonathan Ernst/Reuters

The Obama administration directed more fire against BP last night, ordering it to provide daily updates on its efforts to contain the spill and to stop the use of a toxic chemical dispersant to break up the slick.

The White House said it expected the oil company to post daily updates on its website. "We think that is what the company owes, again, both us and the American people, as we work through our response and as the public has questions about their operations," White House spokesman Robert Gibbs said.

The toughening line on BP comes as the Obama administration has faced heavy criticism for downplaying the scale of the disaster, despite evidence the spill could be caught up in currents that would drag it along the Atlantic coast. Last night it was reported that oil had washed into the marshes at the mouth of the Mississippi, coating the grasses of Louisiana's wetlands, home to rare birds, mammals and a rich variety of marine life.

The Environmental Protection Agency said it was ordering BP to stop the use of two forms of Corexit because of the high toxicity and relative ineffectiveness against the type of crude now polluting the gulf. The two versions of the chemical are banned in the UK because they are damaging to sea life.

More than 600,000 gallons of chemicals have been sprayed on the surface of the gulf, with another 55,000 injected directly into the oil billowing out of the ocean floor.

"Because of its use in unprecedented volumes and because much is unknown about the underwater use of dispersants, [the] EPA wants to ensure BP is using the least toxic product authorised for use," the agency said in a statement.

The heavy reliance on chemical dispersants to break up the spill has raised concern among scientists and environmentalists.

Scientists say the chemicals could be doing more for the oil company's PR than for the overall cleanup of the gulf. The chemicals that break up the oil into small droplets help prevent giant tides of oil washing up on shore.

But they are carcinogenic, mutagenic and highly toxic, and it is unclear how much damage they are causing to marine life in deep water – a risk acknowledged by Jackson.

The ban on Corexit and the demand for BP to release video footage and scientific data could help defuse growing frustration at the failure to contain the spill one month after the Deepwater Horizon went down.

Scientific agencies such as the EPA are now in the line of fire, as is the National Oceanic and Atmospheric Agency (NOAA), which is in charge of oceans.

Much of that pressure revolves around the refusal of BP and the administration to give a reliable estimate for the amount of oil gushing from the ocean floor.

Congress as well as independent scientists have been demanding for days that the government agencies or BP update their estimate for the spill.

BP claimed yesterday that a tube inserted into the broken pipe was collecting some 5,000 gallons of oil a day – but that is the total amount BP initially claimed was leaking from the well. Video footage continues to show oil billowing from the pipe.

The NOAA chief, Jane Lubchenco, has also tried to brush aside demands to produce an estimate for how much oil has now entered the gulf, and where it might be headed.

"At this point, it would not be appropriate to speculate on what that estimate is," she told a conference call with reporters last night.



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