Obama: Failure to cut debt will hurt economy

President Obama stressed the urgency of cutting America's $1.4 trillion budget deficit.   President Barack Obama yesterday promoted his plan to scale back spending without halting aid to education, energy and science, acknowledging to a town hall crowd that mounting deficits could inflict "serious damage" on the country. In an appearance at Northern Virginia Community College in Annandale, Virginia, Obama blasted Republican alternatives to deal with federal budget problems, while at the same time predicting the two deeply divided parties would ultimately find a compromise on spending priorities.

I'm optimistic. I'm hopeful," Obama said in his campaign-style outing. "Both sides have come together before. I believe we can do it again." Obama's pitch came as his re-election bid for next year is now under way in earnest. He is traveling across the country this week with a message that the government must reduce its staggering debt by cutting defense spending and health care costs, increasing taxes on the wealthy and protecting priorities he deems untouchable.

The president and House Republicans are vying for control of a suddenly surging national debt debate. Obama says his plan spreads the burden more fairly than a rival House Republican plan that would cut roughly the same amount of spending through budget cuts and an overhaul of the Medicare and Medicaid health care programs for the elderly and poor.

Meanwhile, US home building and permits for future construction rebounded strongly last month from February's weather-depressed levels, but a glut of housing on the market will make further gains difficult. Housing starts rose 7.2 percent to an annual rate of 549,000 units from an upwardly revised 512,000-unit pace in February, the Commerce Department said yesterday. The rise marked a bounce back after an 18.5 percent drop in February when severe winter weather restrained activity. Although the increase beat Wall Street's expectations for a 549,000-unit pace, economists said it did not signal a decisive shift in construction, which continues to be dragged down by stiff competition from a flood of foreclosed properties. The rebound in housing starts in March does little to hide the fact that home building activity remains close to rock bottom," said Paul Dales, a senior US economist at Capital Economics in Toronto. "With both the demand and need for new homes still very low, housing starts aren't going to enjoy a more meaningful recovery for a few years yet. Residential construction accounts for about 2.4 percent of gross domestic product, and the latest data suggest it would do little, if anything, to lift the economy in the first quarter. Investment in home building grew at a 3.3 percent annual rate in the last three months of 2010. Faced with a poor market, builders have shown little appetite to break ground on new projects. An index of builder sentiment in April, released on Monday, slipped a notch with builders viewing sales conditions now and in the next six months as unfavorable.

Housing starts have declined about 76 percent from their 2006 peak of 2.27 million units, but some economists see light at the end of the tunnel. "Even though there remains a huge glut of unsold properties inhibiting construction activity, that glut is diminishing. There is a relative scarcity of new properties," said Richard DeKaser, an economist at Parthenon Group in Boston. Though used properties ... are super-abundant and are a very effective competitor for new properties ... some people put a premium on new homes and at some point that scarcity is likely to result in improved construction."

From : Kuwait Times