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Obama hedges credibility on big economy fix

The US President Barack Obama is pledging to halve the country’s spiralling budget deficit in his first term, betting his credibility and his re-election on a major rebound in the struggling economy and his ability to push through tax increases.

The pledge of a return to fiscal discipline, expected to be made this week with the publication of his first budget, will be presented as an olive branch to Republican opponents, as the president tries to put his strategy of bipartisanship back on the rails. But Mr Obama is also likely to reaffirm his commitment to letting George Bush’s controversial tax cuts for the wealthy expire.

In his weekend radio and internet address, Mr Obama said he is determined to “get exploding deficits under control”. He promised a budget request that is “sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline”.

While expanding the deficit to stimulate the economy is vital in the short term, “we can't generate sustained growth without getting our deficits under control,” he said.

It is believed the blueprint will show the deficit peaking at $1.5 trillion, but will set a goal of cutting it to $533bn in 2013, the last year of his term. A controversial programme of tax hikes will be central, involving the closure of loopholes on hedge funds, private equity firms and companies operating overseas, while the Bush-era tax cuts for the wealthiest Americans will be allowed to expire in 2010. That was a campaign promise that some Democrats had feared Mr Obama would back away from.

The prospects of forging a bipartisan consensus on the budget looked dim as the Sunday talk shows chewed over leaks about the president’s plans. “I don't think raising taxes is a great idea,” Senate Republican leader Mitch McConnell of Kentucky told CNN yesterday. “And when our good friends on the other side of the aisle say raising the taxes on the wealthy, what they're really talking about is small business.”

Meanwhile President Obama is considering appointing his biggest Wall Street fundraiser to become ambassador to the UK, according to rumours circulating in Washington.

The job, traditionally seen as the most prestigious in American diplomacy, is likely to go to Louis Susman, a former executive at Citigroup, nicknamed “the vacuum cleaner” for his ability to hoover money from donors.

Mr Susman would be replacing Robert Tuttle, who was sent to London by George Bush, for whom he raised $200,000. As one of Mr Obama’s most significant fundraisers since well before his presidential bid, Mr Susman has amassed more than $800,000.

If appointed, the 71-year-old Wall Street veteran, who retired as vice-chairman of Citigroup Capital Markets on 1 February, would be handed the keys to the ambassador’s grace and favour mansion in Regent’s Park.

The Washington Post first reported Mr Susman’s name, citing a source with knowledge of the negotiations.

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