Obama ‘optimistic’ about deficit deal

Obama’s approval ratings are near record low because of deepening economic pessimism among Americans [Reuters]

Barack Obama, the US president, has drawn a sharp line between Republican and Democratic plans to cut the US deficit, but says a deal can be reached despite ideological differences that threaten to damage the country’s economy.

Democrats and Republicans agree that $4 trillion needs to be slashed over roughly a decade, Obama told a town hall-style event in Virginia on Tuesday. But the two parties disagree on what to cut to get there.

“I don’t want to lie to you; there is a big philosophical divide right now. I believe that you’ve got to do it in a balanced way,” he told students at a community college outside of Washington, referring to deficit cutting.

The president was promoting his plan a day after credit agency Standard & Poor’s threatened to strip the US of its prized triple-A credit rating.
 
The Wall Street agency cited concern that Washington’s polarised politics would make it difficult to reach a debt deal before the 2012 presidential election.

Obama, who is travelling around the country this week to advocate his deficit proposals, did not show flexibility over his demands that taxes go up for the wealthiest Americans – a clear dividing line with Republicans.

“We can’t just tell the wealthiest among us, ‘You don’t have to do a thing,'” he said.

“Especially when we know that the only way to pay for these tax cuts for the wealthiest Americans is by asking seniors to pay thousands of dollars more for their health care,” he said, drawing the same line over funding for education, research and infrastructure.

Still, Obama said he thought a deal could be done.

“There will be those who say that we’re too divided, that the partisanship is too stark,” he said. “But I’m optimistic. I’m hopeful. Both sides have come together before. I believe we can do it again.”

Obama’s treasury secretary echoed that optimism, reassuring investors about the U.S. credit rating and dismissing S&P’s action as tone deaf to the chances of getting a deal.

“Actually, I think things are better than they’ve been if you want to think about the prospects for improving our long-term fiscal position,” Timothy Geithner told CNBC television, adding there was “no risk” the US would lose its triple-A rating.

Republican rebuke

Republicans oppose Obama’s efforts to let Bush-era tax cuts on top earners lapse after 2012 and question the president’s readiness to commit to meaningful spending cuts.

Eric Cantor, the No. 2 Republican in the US House of Representatives, lambasted the president for avoiding specifics and focusing on tax increases.

“The president’s plan to increase taxes is a direct assault on job creation and innovation that could throw our economy in reverse,” he said in a statement.

“I’m disappointed that once again the president did not offer specifics about how to put America on a path to pay down our debt,” he said.

How to cut the $1.4 trillion deficit has already become a major issue in the 2012 presidential and congressional campaigns, and both sides are trying to show they have the best plan.

A Washington Post poll on Tuesday showed Obama’s approval ratings near record lows because of deepening economic pessimism among Americans.

The survey showed 47 per cent approving of his performance – a seven-point drop since January.
Republicans sharply criticised Obama’s plan for cutting the deficit, saying it was unveiled in a campaign-style speech aimed at voters and not at striking agreement in Congress.

Both parties claimed ammunition from the S&P warning, but members of the conservative Republican Tea Party caucus saw particular vindication for their anti-spending platform, which helped hand Republicans control of the House in last year’s congressional elections.

Obama did not directly refer to S&P’s action in his comments to the students.