The figures aren't good: Unemployment rises while number of non-working Americans reaches 18-year-high as House and Senate head into major budget vote
- Jobless claims passed the key threshold of 400,000 last week
- 45.4 per cent of Americans had jobs in 2010, the lowest rate since 1983
- Lawmakers set to slash $40billion today
- Obama calls for spending cap by 2014
- Cap would not include Social Security or Medicare
- New poll shows most Americans would rather cut services than raise taxes
Jobless: Unemployment rates spiked last week
As President Obama looks to cut costs and cut the domestic, the number of people claiming unemployment benefits unexpectedly spiked this week, stunning economists who expected the numbers to continue their gradual decline.
The number of people filing jobless claims passed the key threshold of 400,000 as initial claims for state unemployment benefits rose 27,000 to a seasonally adjusted 412,000, according to the U.S. Labour Department.
According to a Reuters poll, economists predicted the numbers to slip to 380,000 from the last week’s adjusted 382,000. A steady decline in unemployment claims has been seen for the past four weeks, up until today.
As of last week a total of 8.52 million people in the US were claiming unemployment benefits under all programs, including regular state programs and emergency unemployment.
Additionally, figures that show that the number of Americans working has dropped to its lowest level in 18 years were released today.
45.4 per cent of Americans had jobs in 2010, the lowest rate since 1983, according to a USA Today analyst. That number peaked during the economic boom times of 2000 at 49.3 per cent. According to the study, last year just 66.8 per cent of men had jobs - the lowest amount on record.
The new numbers are a result of years of poor economic conditions, an ageing population and a plateau in women entering the workforce. Such a trend places further strain on already struggling social programs that are facing major cuts.
President Obama is seeking what some see as drastic measures to curb the skyrocketing federal budget.
Today the House and Senate will vote on a measure that looks to reduce day-to-day budgets of federal agencies, cutting approximately $38billion from the 2011 budget.
On the chopping block: $600million from community health programs, $414million from grants for state and local police departments, and an additional $1.6billion from the Environmental Protection Agency's budget. Meanwhile, construction and repair projects for federal buildings will see $1billion cut, while another $950million will be chopped from community development programs.
After that vote, the GOP-dominated House will begin to debate $6trillion in long-term cuts to the budget Obama proposed in February.
In a speech on Wednesday, President Obama looked to wealthy taxpayers today to bail out the nation's spiralling deficit and help prevent America's baby boomer generation from going broke.
Unveiling a plan to reduce borrowing over the next 12 years by $4trillion, the President said years of overspending meant every American had to make sacrifices.
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Clear target: President Barack Obama announces his plans to cut the $4trillion deficit in a fiscal speech at George Washington University today
Dark times: The President spoke in George Washington University's Jack Morton Auditorium in Washington, DC this afternoon
His cost-cutting package included slashing the domestic budget - including some politically sensitive health care programmes - as well as defence spending.
But he insisted the rich should shoulder more of the burden to prevent the mushrooming national deficit from spinning out of control.
THE MAN WITH THE PLAN: PRESIDENT OBAMA'S PROPOSAL
In the end, Mr Obama's speech was long on attacking Republicans, and short on specifics.
He offered few specifics on how to curb spending. He did:
- Pledge to end the reduced Bush-era tax rates for the wealthiest Americans.
- Propose a 'debt fail-safe' trigger to force spending cuts if debt levels do not decline as planned. This is designed to improve investor confidence by showing the U.S. government is serious about tackling the debt problem and would have the tools to deliver on its promise.
- Call for cutting $770billion from non-defence domestic spending by 2023. That figure does not include spending on major benefit programs like Medicare, Medicaid and Social Security.
- Call for reduction in defence spending by $400billion during the same 12 years.
- Envision spending cuts in Medicare and Medicaid of $480billion through 2023. Those are in addition to the $500billion in reductions over 10 years from projected increases in Medicare spending contained in the health care law the President signed last year.
The President's planned health care reductions also included vague proposals to lower Medicaid costs and reduce Medicare prescription drug expenses.
While the White House concedes that Social Security is facing pressure from an ageing population, Mr Obama did not specify any changes to the national retirement system other than calling for bipartisan efforts to ‘strengthen the programme.’
‘Those who benefit most from our way of life can afford to pay a little more,’ he said.
‘We have to live within our means, we have to reduce our deficit, and we have to get back on a path that will allow us to pay down our debt,' Mr Obama said in a combative lunchtime speech at George Washington University.
‘It's an approach that puts every kind of spending on the table, but one that protects the middle-class, our promise to seniors, and our investments in the future,’ he added.
He spoke as a new Associated Press-GfK poll showed that 62 per cent say they favour cutting government services to sop up the red ink. Just 29 per cent say raise taxes.
Mr Obama insisted that most wealthy Americans would relish helping their country.
‘This is not because we begrudge those who have done well. We celebrate their success.
‘Everybody pays,’ he added, ‘but the wealthy pay a little more.’
He worried that with the baby boomer generation retiring, the U.S. will face a huge financial test as ‘a much bigger portion of our citizens would be relying on Medicare, Social Security and possible Medicaid.’
As much a policy speech as it was a political address, Mr Obama laid the blame for the rising debt on the spending increases and tax cuts enacted during George Bush’s administration and the recession that struck in late 2007.
'We lost our way' after being in 'great shape' in 2000, he said.
The nation's fiscal troubles are set to be at the centre of the 2012 presidential election.
The debt is expected to hit the $14.3trillion ceiling as early as mid-May and a failure to lift it could raise the spectre of default.
Two-thirds of Americans voiced a great deal of concern about the deficit in a Gallup survey last month.
Mr Obama has faced sharp criticism from both Republicans and fellow Democrats for failing to show leadership on the issue of America's ballooning deficit.
Support: In the audience today, from left to right, were White House Chief of Staff William Daley, Treasury Secretary Timothy Geithner and Vice President Joe Biden
The OTHER man with a plan: U.S. House Budget Committee Chairman Rep. Paul Ryan, author of the Republican House budget proposal, arrives to listen to Mr Obama's speech today
‘I don’t need another tax cut. Warren Buffet doesn’t need another tax cut,’ he said.
‘I believe that most wealthy Americans would agree with me. They want to give back to their country, a country that has done so much for them. It’s just that Washington hasn’t asked them to,’ he added.
He pointedly noted that the GOP plan has already been embraced by some Republican presidential candidates.
Such cuts, he said, 'paint a vision of our future that's deeply pessimistic'.
'Their vision is less about reducing the deficit than it is about changing the basic social compact in America,’ he said.
The President said that income for 90 per cent of Americans has gone down over the past decade, while it has increased by $250,000 for the wealthiest 1 per cent.
‘We have to use a scalpel and not a machete to make these cuts,’ he insisted.
One member of the audience in the university auditorium was paying particular attention – the author of the Republican plan, House Budget Committee Chairman Paul Ryan.
Also in attendance were Treasury Secretary Timothy Geithner and Vice President Joe Biden.
Mr Obama previewed his proposals to congressional leaders before the address and even before he delivered his speech, top Republicans were pushing back.
‘If we're going to resolve our differences and do something meaningful, raising taxes will not be part of that,’ said House Speaker John Boehner declared shortly after his White House meeting.
SO WHAT DO THE EXPERTS THINK OF OBAMA'S PLAN?
NORMAN ORNSTEIN, RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON:
'He actually did what he wanted to do, which is to reframe this debate and give himself both a credible plan that won't have the left going ballistic but also gave him the running room to criticize the Ryan plan.'
JEFFREY FRANKEL, ECONOMICS PROFESSOR, HARVARD'S JOHN F. KENNEDY SCHOOL OF GOVERNMENT, CAMBRIDGE, MASSACHUSETTS:
'It's balanced. It isn't as if anyone else has a plan... If he had come out any earlier with this level of specificity, he would have just been (attacked) for wanting to raise taxes. If he had waited any later, he would have lost the moment... Everybody was saying, "Where's the leadership?"'
CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES, CATO INSTITUTE IN WASHINGTON:
'The only new thing I see is a debt fail-safe trigger to cut spending and hike taxes automatically. That's obviously not going to fly with the Republicans... To save money, they just keep tightening top-down regulations and control over what healthcare is provided. I think that frankly should be pretty scary to Americans.'
DOUGLAS HOLTZ-EAKIN, FORMER CONGRESSIONAL BUDGET OFFICE DIRECTOR AND PRESIDENT OF AMERICAN ACTION FORUM, WASHINGTON:
'It's pretty underwhelming, in my view... This looks like version 2.0 of a bad budget.'
WILLIAM GALSTON, SENIOR FELLOW, BROOKINGS INSTITUTION, WASHINGTON:
'Put very simply, the President has gotten off the sidelines and into the game... This is an opening bid in what will clearly be a negotiation.'
This new clash comes just a week after the President announced he would seek re-election.
For the past two months, Obama has been arguing for protection of his core spending priorities, including education and innovation.
His turn to deficit reduction reflects the pressures he faces in a divided Congress and with a public increasingly anxious about the nation's debt, now exceeding $14trillion.
'Any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget,' the President said.
To help enforce budget discipline, the President called for resurrecting a spending cap that would be triggered if the nation's debt did not stabilize and begin to decline by 2014.
The cap would not apply to Social Security, low-income programs or Medicare benefits.
The President's plan, outlined in a seven-page White House fact sheet, draws many of its ideas from the December recommendations of Mr Obama's bipartisan fiscal commission, which proposed $4trillion in deficit reduction over 10 years.
As in the commission's plan, three quarters of the deficit reduction would come from spending cuts, including lower interest payments as the debt eases. One quarter, or $1trillion, would come from additional tax revenue.
For the White House, the speech comes as Mr Obama pushes Congress to raise the limit on the national debt, which will permit the government to borrow more and thus meet its financial obligations.
The country will reach its debt limit of $14.3trillion by May 16.
The Treasury Department has warned that failure to raise the limit by midsummer would drive up the cost of borrowing and destroy the economic recovery.
In laying out his plan, the President is wading into a potential political thicket.
Liberals are loath to making cuts in prized Democratic programs like Medicare and Medicaid, and in Social Security.
Moderates worry that his plan could unravel bipartisan deficit-cutting negotiations.
And Republicans reject any proposal that includes tax increases.
Let the games begin... Mr Obama has made his opening bid. So what happens now?
For all his tough talk, Mr Obama is handicapped by the Republican-controlled majority in the House of Representatives who are set to block any proposal they don't like.
Today was the start of negotiations. The President called for both parties to work with him and strike a deficit cutting compromise. He asked party leaders to name negotiating teams and set a June deadline for an agreement.
But it's not going to be easy. The recent battle over the budget, which dragged on so long and was so contentious that the government came within an hour of shutting down, was just a warm-up compared to the battle over debt and the deficit.
And, on the Republican team: John Boehner, centre, Eric Cantor, left, and Mitch McConnell, right, return to Capitol Hill after meeting with Obama at the White House in advance of his speech today
HIRING IS ON THE UP AS THE ECONOMY GROWS
Last month businesses advertised 3.1million job vacancies, evidence the employment market is finally beginning to pick up as the economy grows.
The figure was the highest recorded by the Labor Department since September 2008, the height of the financial crisis.
The unemployment rate fell to 8.8 per cent, the lowest level in two years, as the private sector added more than 200,000 jobs for a second straight month - the first time since 2006.
Competition for jobs is beginning to ease, although job hunters will still find themselves up against at least four others for every post.
It's down down from almost seven in July 2009, but it's still much higher than the two to one ratio found in a healthy economy.
And there's still a long way to go before vacancies reach pre-recession rates of 4.4million, last seen in December 2007.
Even before Mr Obama's speech announcing his proposal, Republicans argued that it didn't go far enough to reduce a debt that has reached $14 trillion.
They also oppose any tax increases.
'If we're going to resolve our differences and do something meaningful, raising taxes will not be part of that,' said Republican House Speaker John Boehner.
Mr Obama and Democrats have similarly rejected a Republican proposal which would reduce spending by $5.8trillion over the next decade, largely through cuts in health care programs for the elderly and the poor. And it would cut taxes for corporations and the wealthy.
Prospects are dim for the quick passage of either proposal.
While the Republicans are likely to win approval for their plan in the House of Representatives, where they have a majority, the Democratic-led Senate would reject it.
Still, both parties are taking big political gambles.
Mr Obama needs to keep the support of the liberal Democratic base, which opposes cuts to social programs, while demonstrating to independent, moderate voters - who often determine the outcome of elections - that he is serious about reducing the deficit.
Republicans have made spending cuts a core issue. They won control of the House last year largely on the strength of the ultraconservative Tea Party movement, which favors a smaller role for government and sharply reduced spending.
But Republicans are walking into a political minefield by proposing an overhaul of Medicare, the health insurance program for the elderly.
Millions of beneficiaries living on fixed income depend on the program and fear any changes. Older Americans turn out more for elections than younger ones do.
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