Obama readies his plan to cut deficit

City A.M. Reporter
US PRESIDENT Barack Obama will offer a long-term plan for deficit reduction this week in preparation for bigger US spending battles ahead, the White House said yesterday.

Senior White House adviser David Plouffe said Obama would explore savings in defence spending and the popular Medicare and Medicaid health programmes for the elderly and poor as he seeks to reduce the $1.4 trillion (£855bn) annual deficit.

White House officials said Obama would release his plan on Wednesday.

Republicans and Democrats eked out a deal to avert a government shutdown on Friday, agreeing to cut $38bn in spending for the last six months of this financial year.

Much harder battles lie ahead over the budget for the 2012 fiscal year that begins in October, and over the need to raise the current $14.3 trillion limit on US government borrowing authority in the next few months.

“We’re going to have tough disagreements. It’s going to be hard to bridge divides,” Plouffe said in a TV interview, adding the budget deal showed compromise was still possible in Washington.

Representative Paul Ryan said he expected a political fight over the debt ceiling.

“There will be some kind of negotiations and yes it probably will go up to some sort of a deadline,” he said in an interview, adding: “Our strategy is not to default. Our strategy is to get spending under control.”