Obama finally makes move to get U.S. budget deficit under control

With a total national debt standing at a record $14.1 trillion and the U.S. Budget deficit at $1.65 trillion and over 10% of GDP (the total spend being $3.7 trillion) this year it was about time that someone started worrying about balancing the books. The deficit has risen from $1.3 billion last year. Normally at this stage in the economic cycle, deficits start to drop, but not in the Obama administration. The age of austerity hasn't yet hit U.S. tax payers, but surely its only a matter of time? We we know in the U.K. steps to tackle a deficit can be politically unpopular and can hinder economic growth if over draconian.

Yesterday President Obama announced that he plans to start making cuts for the budget year starting October 2012 with the aim of reducing the deficit by $1.1 trillion over ten years. These include rolling back Bush era tax cuts for families making more than $250,000 annually, reducing tax breaks for oil and gas companies and for U.S. companies’ overseas income and freezing government employees salaries for 5 years. Defence spending would be cut by $78 billion and a five-year freeze on discretionary spending would reduce the deficit by about $400 billion.

The questions for Obama are - is this too little too late?, will this package of cuts get through Congress and the Senate especially with the next Presidential election in 2012? In the meantime, the U.S. government can only hope that China, Japan and others continue buying treasury bonds to sustain this debt burden.