Obama, McCain Clash on Budget Austerity

President Obama kicked off an offensive today defending his strategy to pull the economy out of its tailspin, assuring large banks he won't let them fail and promising taxpayers he will cut the deficit and reform government spending.

But he quickly ran into criticism of his spending from Sen. John McCain, R-Ariz., who noted that Obama's new helicopter will cost as much as Air Force One.

The Pentagon has ordered a fleet of 28 presidential helicopters priced at $400 million -- each.

Obama, who called on his former presidential rival to ask the first question at a Fiscal Responsibility Summit, agreed with McCain and drew laughs when he said he has already ordered Pentagon chief Robert Gates to review the contract for the new presidential helicopter.

Jake Tapper

"The helicopter I have seems perfectly adequate to me," Obama said to laughs from a roomful of members of Congress and fiscal experts. "Course I've never had a helicopter before and maybe I've been deprived and didn't know it."

Earlier, the president wasn't laughing as he made official what he leaked over the weekend, that he intends to cut the nation's massive budget deficit in half by the end of his first term.

That promise came with a blistering criticism of the Bush administration, although he never mentioned any names.

"The casual dishonesty of hiding irresponsible spending with clever accounting tricks, the costly overruns, the fraud and abuse, the endless excuses -- this is exactly what the American people rejected when they went to the polls," he said.

"We'll eliminate the no-bid contract that have wasted billions in Iraq. We'll end the tax breaks for companies shipping jobs overseas, and we'll stop the fraud and abuse in our Medicare program. And we will reinstate the pay-as-you-go rule that we followed during the 1990s, the rules that helped us start this new century with a $236 billion surplus," he said.

Obama talked budget this morning when he met with governors on the stimulus plan and later when he opened his summit. He will address both house of Congress Tuesday night, and on Thursday will present his first budget.

The offensive began with a Treasury Department statement assuring the banking system that it would not allow "systemically important financial institutions" to fail.

The statement from the Treasury Department and four other federal banking regulators came as Citigroup officials were back in talks with the administration for yet more bailout aid and investors worried that the government might nationalize certain banks to prevent their collapse. The prospect of nationalization has had bankers and investors holding their breath.

The Treasury statement appears to be an attempt to reassure investors that the big banks won't be allowed to collapse and suggests that nationalization is not the administration's plan.

"The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth," the statement said. "Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments."

The statement does not mention Citigroup, but the government's willingness to ensure the survival of major banks has eased fears that the administration would nationalize them. Those fears drove bank stocks down in trading Friday.

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