U.S. President Barack Obama ordered the U.S. Treasury Saturday to implement tax cuts for 95 percent of Americans, fulfilling a campaign pledge he hopes will help jolt the economy out of recession.

cnbc.com President Barack Obama

Obama will allow tax breaks given to wealthier Americans under his predecessor, George W. Bush, to expire in 2010 as scheduled rather than eliminate them sooner, an administration official said Saturday.

The new tax cuts are part of a $787 billion economic recovery plan passed by the Democratic-controlled Congress over Republican opposition. The aim is to put more money in the pockets of Americans and stimulate the economy by increasing consumer spending.

"I'm pleased to announce that this morning the Treasury Department began directing employers to reduce the amount of taxes withheld from paychecks, meaning that by April 1st, a typical family will begin taking home at least $65 more every month," Obama said in his weekly radio address.

"Never before in our history has a tax cut taken effect faster or gone to so many hard-working Americans," he said.

Big Savings From Winding Down Iraq War

Obama wants to slash the ballooning deficit in half by 2013, U.S. officials said Saturday, after massively increasing public spending to stem the worst economic crisis in decades.

The president will outline his ambitious goal when he hosts a summit at the White House Monday on fiscal responsibility and later in the week when his administration presents a summary of its first budget, for the 2010 fiscal year.

With tens of thousands of Americans losing their jobs in the midst of a global economic meltdown, Obama has said fixing the U.S. economy is his top priority. He has acknowledged that his success or failure in that will define his presidency.

"We can't generate sustained growth without getting our deficits under control," Obama said in his weekly radio address in which he also announced immediate implementation of tax cuts for 95 percent of Americans as part of the effort to stimulate the economy.

An administration official said Obama was proposing to cut the deficit, which private economists project will rise to $1.5 trillion this year, through a mixture of tax increases on wealthier Americans and spending cuts.

"The deficit this administration inherited was $1.3 trillion or 9.2 percent of GDP. By 2013, the end of the president's first term, the budget cuts the deficit to $533 billion or 3.0 percent of GDP," the official told Reuters on condition of anonymity.

"Most of the savings will come from winding down the war in Iraq, increased (tax) revenue from those making more than $250,000 a year, and savings from making government work more efficiently and eliminating programs that do not work," the official said.

The United States spent about $190 billion on the wars in Iraq and Afghanistan in 2008. Obama has pledged to withdraw U.S. combat troops from Iraq within 16 months while ramping up the U.S. military effort in Afghanistan.

With tens of thousands of Americans losing their jobs in the midst of a global economic meltdown, Obama has said fixing the U.S. economy is his top priority. He has acknowledged that his success or failure in that will define his presidency.

Obama campaigned for the White House last year on a pledge to roll back his predecessor George W. Bush's tax cuts on the wealthy few and implement a cut for 95 percent of Americans.

His announcement came a day after one of his top economic advisers, former Federal Reserve Chairman Paul Volcker, said the global economy may be deteriorating even faster than during the Great Depression of the 1930s.

Since being sworn into office on Jan. 20, Obama has sought to reassure Americans that his government is tackling the economic crisis boldly and swiftly — holding near-daily events to announce measures to stem mortgage foreclosures, prop up failing banks, rescue the ailing auto industry and drive his stimulus package through Congress.

The measures have received a mixed early reaction from gloomy financial markets uncertain whether they will succeed in arresting the downward economic spiral.

The package includes $282 billion in tax cuts — the Republicans pushed unsuccessfully for more — and $120 billion for public works projects including highway and rail projects.

'Hazardous Road Ahead'

"But as important as it was that I was able to sign this plan into law, it is only a first step on the road to economic recovery," Obama said in his address.

"None of this will be easy. The road ahead will be long and full of hazards. But I'm confident that we, as a people, have the strength and wisdom to carry out this strategy and overcome this crisis," he said.

His announcement on the tax cuts capped a week that saw him sign the stimulus package into law and announce new measures to help families facing foreclosure and those struggling to make mortgage payments.

He will step up the pace next week when he holds a summit at the White House Monday to look at how to rein in the country's ballooning deficit and bring government spending under control as the economy starts to recover.

Lawmakers, academics and business leaders have been invited to share their ideas on how to cut the $1 trillion deficit that Obama inherited along with two costly wars in Iraq and Afghanistan.

Obama will follow the summit with a major speech Tuesday to a joint session of Congress in which he will lay out his domestic and foreign policy agenda. Inevitably, the economic crisis will loom large.

After a short breather Wednesday to host a concert honoring Stevie Wonder, Obama Thursday will unveil his proposed budget for the 2010 fiscal year, which will reflect the big increases in public spending as part of the economic recovery plan.

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