Obama warns of second recession as borrowing soars
PRESIDENT Barack Obama has warned the US economy may slip into a “double-dip recession” unless urgent steps are taken to bring government borrowing under control.
In his sternest warning yet on the state of America’s public finances, Obama said his administration faced a difficult balancing act of trying to encourage job creation while reducing the soaring budget deficit.
His comments were made in Beijing at the end of an eight-day tour of Asia, hinting at his awareness of China’s discomfort as the world’s largest reserve holder of US dollars. The US budget deficit is expected to hit a record $1.5 trillion (£897bn) this fiscal year. Obama said: “It is important to recognise that if we keep adding to the debt, even in the midst of this recovery, that at some point people could lose confidence in the US economy in a way that could actually lead to a double-dip recession.” The president has increasingly come under fire from Republican opponents over government borrowing as the public mood shifts in favour of deficit reduction.
However, with unemployment at 10.2 per cent and following the 10.6 per cent downwards lurch in housing starts in October, he faces a quandary.
Obama described the situation as “about as hard of a play as there is”, affirming the government’s commitment to long-term deficit reduction but reiterating the ongoing need to prop up the economy with spending.
Job creation is “an inexact science”, he added, but said boosting employment was his first priority.