Obama Plans Budget Cuts To Offset Stimulus Effort

President-elect Barack Obama vowed Tuesday to cut billions of dollars from wasteful government programs as he sought to reassure Americans anxious about a growing mountain of debt and a faltering economy.

Jurvetson Barack Obama

Obama held a second news conference in Chicago in two days, and planned a third for 10:45 a.m. EST Wednesday, seeking to calm see-sawing financial markets looking for signs that his incoming administration has a viable plan to tackle the worst economic crisis in decades.

Promising Americans a more cost-effective and efficient government, he said: "If we're going to make the investments we need, we must also be willing to shed the spending we don't."

"We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness or exist solely because of the power of a politician, lobbyist or interest group," he said.

An obvious example, Obama said, were reports of crop subsidies to farmers who make more than $2.5 million per year. He did not say what other programs he was eyeing.

Obama named Peter Orszag and Rob Nabors as the top two officials at the Office of Management and Budget, charging them with examining federal spending to cut wasteful programs.

Video: Obama's news conference.

Orszag now heads the Congressional Budget Office and Nabors serves as staff director of the House Appropriations Committee. Both held White House positions under President Bill Clinton.

The two join a growing economic team which is already designing a stimulus package to jolt the U.S. economy back into growth—a proposal Obama has said will be costly.

"Given the extraordinary circumstances we find ourselves in...it is important for the American people to understand that we are putting together a first-class team and that we don't intend to stumble into the next administration," he said.

He was speaking after new figures were released showing the U.S. economy shrank more severely during the third quarter than previously estimated as consumers cut spending at the steepest rate in 28 years.

The Federal Reserve also announced two new programs aimed at making it easier for Americans to obtain loans for homes, cars and on credit cards -- a $600 billion program to buy mortgage-related debt and securities, and a $200 billion program to increase the availability of consumer debt.

The Bush administration and Fed have committed trillions of dollars to try to avert a financial meltdown. That will push the national debt well above $11 trillion.

Obama acknowledged that structural spending had created a "huge mountain of debt" but said addressing the ballooning deficit would have to wait until the economy was well on the road to recovery.

"The immediate needs of the economy and the long-term concerns are not necessarily incompatible," said Obama, who formally takes office on Jan. 20. Obama said Monday the costly stimulus package was still needed to kick-start the U.S. economy.

While he declined to put a price tag on the two-year stimulus proposal to create or keep 2.5 million jobs, other Democrats have said it could run into hundreds of billions of dollars.

Obama's decision to hold news conferences on the economy three days in a row is in sharp contrast with the low-profile approach he adopted after beating Republican John McCain in the the presidential election three weeks ago.

He has repeatedly said the United States has only one president at a time and pointed to the efforts being made by President Bush and his economic team.

But there has been concern about a leadership vacuum, with Bush seen by some as a lame duck president unable or unwilling to make the changes needed to fully address the crisis.

Obama appeared to acknowledge this Tuesday, saying: "It's important, given the uncertainty in the markets and given the very legitimate anxiety that the American people are feeling, that they know that their new president has a plan and is going to act swiftly and boldly."

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