Obama presents his plan to reduce deficit amid market nervousness

Barack Obama outlined his plan for reducing the federal deficit in a speech at the White House as markets tumbled in Wall Street and Europe. Obama ask also for a quick approval of his jobs plan presented last week.

According to Barack Obama his plan would reduce the deficit by $4 trillion and mentioned that the US has to live within his means. He said he was waiting to sign into law his job plan saying that his bill agree with the Republican and Democrat view and it would not add to the national debt.

He outlined that for every $2 in tax cuts there will be a $1 in more revenue, from tax hikes. The plan is part of his recommendation to the bipartisan congressional debt reduction committee. The program includes a $1.5 trillion increase in revenue, a reduction in discretional spending of about $1.5 trillion and a $1.1 trillion cut from the war in Iraq and Afghanistan.

The US President also announced a future reform to Medicaid and Medicare and a reform to the tax code. He also argued that he was not going to sign any bill that reduces the deficit by only cutting spending arguing that the reduction has to come by both, and increase in revenues and cuts in spending, pointing to a tax hike to millionaires. "This is not class warfare, it’s math, the money has to come from some place,” Obama said. He promoted the “Buffett Rule" that seeks people who earn more than $1 million to pay the same tax rate as those who earn less.


More political talks and discussions are expected as Republican leaders continue to oppose to any tax rate hike. The party has the control of the House of Representatives so an agreement between Democrats and Republicans is needed in order for the propositions to pass.

Before Obama’s speech, the National Association of Home Builders, released its housing market index that showed a decline from 15 to 14 in August. Market attention remains focus on the results on the 2-day meeting of the FOMC that will start on Tuesday. Market is expecting some kind of announcement from the Fed in order to boost US economy that is growing at a disappointment rate, not enough to reduce the unemployment rate.

Meanwhile stocks started the week with an important slump amid concerns over the near-term future in Greece and on worries about the global economy. In Europe, the FTSE 100 lost 2.03%, the CAC 40 3.00% and the DAX 2.873%, while in Wall Street, the Dow Jones is falling 1.65% and the Nasdaq tumbles 0.96%. Both indexes moved off session lows after Obama’s speech. Treasuries are rising and the yield on the 2 year bond hit a record low earlier.