Obama's budget freeze gets a chilly reception

One day after a State of the Union address that called for compromise and conciliation, President Obama faced instant headwinds as an offer to freeze domestic spending for five years got short shrift from Republicans and new projections had the federal deficit growing to $1.5trillion (£940bn).

Mr Obama made a dash for the centre in an hour-long address to a joint session of Congress, with gestures to the new Republican majority in the House of Representatives, including promises to work on cutting corporate taxes and reforming the tax code. "These are the kinds of things the American people want us to work on and I look forward to working together," Eric Cantor, a top Republican, said yesterday.

But there was a mostly cool reception to Mr Obama's proposal, which could save $40bn a year over 10 years compared to a Republican plan that seeks cuts twice as deep. The freeze would apply to about a fifth of US government spending and would not touch funding for defence or Social Security.

At the podium on Tuesday night, Mr Obama insisted that only by finding common ground would progress be possible in Washington. "We will move forward together, or not at all, for the challenges we face are bigger than party, and bigger than politics," he told the chamber where for first time Republicans and Democrats sat amongst each other and not in blocks.

But Mr Obama, who flew yesterday to Wisconsin to tour three new-technology factories, also used the speech to stake out his own ground in the coming fight over spending levels. Notably, he insisted that the government should invest in areas that promised jobs for the future, including rail transport, education and renewable energy.

America, Mr Obama declared, was facing a "Sputnik moment" in its history, referring to the late 1950s when the Soviets seemed poised to overtake the US in the space race. The country, he said, must invest in innovation if it wasn't to fall behind competitors.

That, however, was interpreted on the Republican side either as being insufficiently serious about the deficit crisis or as sheer doublespeak. The Republicans this week unveiled plans to slash spending by at least $80bn. Some on the Tea Party wing think that is too timid and want the cuts to be deeper.

The fight will burst into the open in mid-February when Mr Obama must put flesh on his deficit-cutting pledges when he submits the next federal budget to Congress and when Republicans come forward with a budget draft of their own. Even more peril comes in March when the White House will be forced to ask Congress for an increase in the country's debt ceiling to ensure it doesn't default on its debt. The Republicans may demur unless Mr Obama buckles to their deficit-beating demands. "A partial freeze is inadequate at a time when we're borrowing 41 cents of every dollar we spend, and the administration is begging for another increase in the debt limit," the House of Representatives Speaker, John Boehner, responded.

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