Geithner says U.S. deficit unsustainable

08:14, March 17, 2010      

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U.S. government's top economic policy makers acknowledged Tuesday that the country's fiscal policy is unsustainable.

"We are on an unsustainable path," Treasury Secretary Timothy Geithner said in a joint statement prepared for a testimony before the Congress with Peter Orszag, White House Director of Management and Budget, and Christina Romer, Chair of the White House Council of Economic Advisers.

The officials said that 2010 is "a trying year for the Nation." The worst economic conditions now appear to be over. However, the country faces significant and ongoing challenges, including high unemployment and a medium- and long-term fiscal situation that " could ultimately undermine future job creation and economic growth. "

On the day the Obama administration took office in February 2009, the budget deficit for 2009 stood at 1.3 trillion dollars, or 9.2 percent of GDP. Over the following ten years, projected deficits totaled 8 trillion dollars.

But in reality, the fiscal year 2009 ended in September saw a deficit of record 1.42 trillion dollars. President Barack Obama projected in his report to the Congress earlier this year that fiscal year 2010 will see a 1.56 trillion federal budget deficit. And it will not fall significantly in the coming years.

"Without changes in policy, deficits would total 10.6 trillion dollars over the next ten years," Geithner said.

In tackling the deficit issue, the Obama administration proposed several measures, including imposing a three-year freeze on non-security discretionary funding, requiring the financial services industry to fully pay back the costs of the bailout program, allowing the 2001-2003 tax cuts for households earning more than 250,000 dollars a year to expire, elimination funding for inefficient fossil fuel subsidies.

But "even with this substantial deficit reduction, the Nation will still face unsustainable medium- and long-term deficits," the statement said.

The Secretary urged the Congress to pass the health care bill, which was in hot debate among lawmakers, arguing that it will reduce the country's deficit substantially in the future.

Besides, the Obama administration believes that as the economy recovers, the deficit will naturally decline.

But many economists remain skeptical about the U.S. government' s will to return deficit discipline.

Source: Xinhua
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