by Stephen Collinson
SINGAPORE - President Barack Obama on Sunday vowed to take "serious steps" to cut the huge US budget deficit, which is complicating America's economic recovery hopes and threatening his own political prospects.
Obama told Asia-Pacific leaders at a summit here that he intended to curtail US government debt, with the White House forecasting a whopping deficit of US$1.502 trillion (S$2.1 trillion) in fiscal 2010.
He accompanied his pledge with a call on regional leaders to refashion their export-led economies to rebalance world growth and forestall future crises.
"As the economy recovers, I intend to take serious steps to reduce America's long-term deficit," Obama said at the Asia-Pacific Economic Cooperation (APEC) forum, in remarks released by the White House.
"Debt-driven growth cannot fuel America's long-term prosperity," he said.
Obama's Republican critics, and some conservative Democrats, have called on the president to rein in spending on huge programmes such as health care and climate change to avoid inflating the sky-high deficit.
The potent political charge that the White House is piling up debt that will bankrupt future generations of Americans will be a prime bone of contention in mid-term congressional elections next year.
Obama pointed out to the 20 other APEC leaders that he had inherited a deficit already above a trillion dollars from former president George W. Bush.
He also argued that he had little choice but to mandate high levels of deficit spending to stimulate the economy, amid the deepest economic crisis in decades.
Obama warned Asian leaders that he was seeking changes to the way regional powers underpin their own growth by profiting from US consumption, in a rebalancing of the global economy.
"We cannot follow the same policies that led to such imbalanced growth," he said, highlighting the severe deficits run up by the United States.
"If we do, we will continue to drift from crisis to crisis, a failed path that has already had devastating consequences for our citizens, our businesses, and our governments."
There has also been concern over the state of US finances from China, whose President Hu Jintao attended the APEC summit in Singapore.
China said last month it was encouraged by signs of an economic recovery in the US, but hoped it would keep its budget deficit to an "appropriate size" to stabilise the US dollar exchange rate.
Beijing is worried that US deficit spending will threaten the assets of China, which invests more than half of its foreign currency reserves in American bonds and is the United States' largest creditor.
The US government announced last month that it had closed its 2009 fiscal year with a record budget deficit of US$1.417 trillion, up US$962 billion from the prior year.
The huge gap stemmed from declining revenues and a massive boost to spending in a 787-billion-dollar stimulus plan designed to jolt the world's largest economy from its prolonged recession.
Concerns over the deficit underscore a fundamental tension undercutting Obama's presidency in its first year - the extent to which he is attempting sweeping political change at a moment of historic financial peril.
Many economists say high deficits during economic crises are acceptable to fuel government spending to stimulate growth.
But long-term deficits can result in high interest rates, making it much harder for consumers to finance outlays such as new homes and cars.