Obama outlines states' stimulus package to governors

WASHINGTON -- President Barack Obama said Monday after eight years of a "continued deterioration in the government's balance speech" Republicans and Democrats are concerned about the legacy they're leaving the next generation.

The president spoke at the conclusion of a fiscal responsibility summit held with top lawmakers and economists at the White House.

"My sense is despite partisan differences ... everybody is concerned about the legacy we're leaving to our children," Obama said.

After brief remarks, Obama heard from the participants, calling on his former rival, Sen. John McCain, R-Ariz., to talk about what came ouf of his working group, which discussed procurement.

"I think it was a very fruitful discussion," McCain said, adding that the group discussed how cost overruns in the Defense Department were a huge problem and citing the new presidential fleet of helicopters as $11 billion over budget.

Obama said the helicopter he has now seems adequate but then he'd never had a helicopter before so "maybe I've been deprived and I didn't know it," as the group roared with laughter. He said he has talked to Defense Secretary Robert Gates about reviewing the program and its ballooning costs.

The day started with Obama telling the governors that $15 billion from the stimulus package will be distributed to states on Wednesday to help cover the costs of Medicaid programs. Later in opening remarks at the summit, the president pledged to slash the budget deficit in half by the end of his term.

"We cannot and will not sustain deficits like these without end ... We cannot simply spend as we please and defer the consequences," the president said. "I refuse to leave our children with a debt they cannot repay."

Obama summoned allies, adversaries and outside experts to a the summit to discuss the nation's future financial health.

To achieve his goal Obama said Washington needed to control spending and that he and others would go through the budget "line by line" to get rid of wasteful spending to "eliminate programs that don't work to make room for those that do."

The president said he would reinstate "the pay as you go rule" that created as $236 billion surplus at the start of the century. The administration projects the deficit will be $1.5 trillion.

"You don't spend what you don't have," he said. "This is the rule that families across the country follow every day."

Obama addressed the governors at the conclusion of a conference of the National Governors Association.

"By the time most of you get home, money will be waiting to help 20 million vulnerable Americans," Obama told the governors referring to the money for Medicaid. "This is not a blank check … these funds are intended to go directly toward helping struggling Americans keep their health care coverage."

The recession has had a huge impact on state budgets, and one area public officials are struggling with is in meeting costs in the Medicaid program for the poor.

Obama also announced he was appointing Vice President Biden to oversee implementation of the $787 billion stimulus package. Biden will meet with key Cabinet members "to make sure our efforts" are swift, effective and efficient.

"The American people are watching," the president said. "They need this plan to work and they expect to see their money spent" for the right purpose.

Obama acknowledged the debate that has ratcheted up in recent days among the governors on the stimulus plan, with some calling the package wasteful spending.

At issue is a proposed expansion of state unemployment benefits for part-time workers and others who where previously ineligible to receive the funding.

Some GOP governors — several with an eye on the 2012 presidential contest including Mark Sanford of South Carolina and Bobby Jindal of Louisiana — say they may not accept that funding because it will require a tax increase on employers once the stimulus money runs out.

"I think there are some very legitimate concerns on the part of some about the sustainability of expanding unemployment insurance. What hasn't been noted is that that is $7 billion of a $787 billion program. And it's not even the majority of the expansion of unemployment insurance," Obama said.

"What I don't want us to do is to just get caught up in the same old stuff that inhibits us from acting effectively and in concert," he said.

At a news conference afterward the governors said that even though there still are differences over the simulus package in both parities it was crucial that they make it work.

Democratic Gov. Ed Rendell of Pennsylvania said, "We have to cooperate in making this all work. I think every one of us, Republican or Democrat alike, understand that."

Jindal, who said he thinks there could have been a different stimulus written that focused on infrastructure and tax credits, added that he appreciated that Obama recognized that there were differences, was willing to include the governors in discussions and wanted to insure the money is spent "with as much accountability and transparency as possible."

Contributing: Carolyn Pesce in McLean, Va.; Associated Press