Wednesday, June 17, 2009

Obama frets on debt, sees U.S. unemployment rising

Obama frets on debt, sees U.S. unemployment rising
WASHINGTON (Reuters) - President Barack Obama said on Tuesday that worrying about the U.S. government's finances "keeps me awake at night" and the country needed to start planning now to tackle soaring deficits.
In a pair of interviews on CNBC and Bloomberg television, Obama defended increasing government spending to prevent the recession from worsening, and warned the unemployment rate may hit 10 percent this year, a level not seen since 1983.
"There's no doubt that we've got a serious problem in terms of our long-term deficits and debt," he told CNBC. "I make no apologies for having acted short term to deal with our recession."
But he said once the recession ends, "we're going to have to close that gap between the amount of money coming in and the amount of money going out."
The Congressional Budget Office estimated on Tuesday that the federal deficit would hit $1.43 trillion in fiscal 2010 under Obama's budget plan, slightly higher than it had previously forecast.
Obama said unless the United States can contain its long-term debt and deficits, foreign investors may shun U.S. assets, driving up borrowing costs for the government as well as households and businesses.
"I am concerned about the long-term issue of our structural deficit and our long-term debt because if we don't get a handle on that then there's no doubt that at some point whether it's the Chinese, the Koreans, the Japanese, whoever else has been snatching up Treasuries are going to decide that this is too much of a risk," he told Bloomberg.
Rising health care costs put the biggest strain on the budget, so curbing those costs would help shore up U.S. finances, he said. Obama has proposed overhauling the health care system to cover those without insurance, but critics have questioned how he will pay for that without worsening the fiscal position.
He said the pace of job losses was slowing and the economy was "going to turn around," but the unemployment rate would probably rise from its current level of 9.4 percent.
Economists advising the American Bankers Association forecast earlier on Tuesday that the U.S. unemployment rate would peak at 10 percent, although they did not expect it to reach that mark until early in 2010.
"You're starting to see the engines of the economy turn," Obama said on Bloomberg. "It's going to take a long time. We had a huge deleveraging that took place, but I'm confident that if we take the steps that are necessary on healthcare, on energy, on education. If we get a strong financial regulatory system in place so people have confidence in the markets again, that we will end up seeing a recovery shortly."
(Reporting by Emily Kaiser and Karey Wutkowski; Editing by Diane Craft)

Source: Reuters

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