WASHINGTON -- President Obama pledged boldly to cut the trillion-plus dollar U.S. budget deficit by half in his first term, even as he announced massive spending to revive the sagging economy.
He issued the vow shortly after telling state governors he was sending them $15 billion to help with health care payments for poor people -- a first outlay by Washington of Obama's $787 economic stimulus plan designed to rescue the nation's economy from the steepest downturn in eight decades.
In a day of fevered economic activity, the administration also announced it had revamped financial bailout plans with an eye to injecting fresh capital into financial institutions starting Wednesday. Several regulatory agencies issued the statement as concerns grew that some of the biggest U.S. banks likely need more federal money to survive the fallout from the worst financial crisis since the 1930s.
The plan was designed boost available capital by shifting the nature of government holdings in the banks without fresh injections of cash.
The statement did not name any specific banks or respond to reports that the government was considering increasing its ownership of Citigroup Inc. The White House just last week downplayed persistent speculation that some banks could be effectively nationalized by the federal government.
The announcement failed to salve the investment community as the American stock market move to lows not seen since 1997.
The new president has been positioning himself on the economy in advance of his first speech to make the case for his budget plans to Congress on Tuesday, the same day he holds his first meeting with Japanese Prime Minister Taro Aso.
Meanwhile, a senior administration official said Obama had chosen his third candidate for the job of U.S. commerce secretary after his previous two picks resigned.
The president's choice, former state of Washington Gov. Gary Locke, was the first Chinese-American U.S. governor when he served two terms in the Washington statehouse from 1997 to 2005.
The official spoke on condition of anonymity because the announcement has not yet been made.
The commerce post is typically not one of the more high-profile jobs in any administration. But in Obama's administration, the delay in getting a commerce secretary has been top news in large part because it has been accompanied by other Cabinet troubles. He still does not have a health and human services secretary, either. Former Senate Democratic leader Tom Daschle withdrew his nomination for that post amid a tax controversy.
Obama's first pick for the commerce post, which requires Senate confirmation, was New Mexico Gov. Bill Richardson. He withdrew in January, before Obama took office, after the disclosure that a grand jury is investigating allegations of wrongdoing in the awarding of contracts in his state.
His second choice, Republican Sen. Judd Gregg, backed out a week after accepting, citing "irresolvable conflicts" with the policies of the Democratic president.
At the beginning of his second month in office, Obama met with state governors Monday morning and turned his attention in the afternoon to a White House economic summit that pulled together political and economic allies, adversaries and outside experts.
"We cannot and will not sustain deficits like these without end," the president said in opening remarks to the summit. "We are paying the price for these deficits right now."
Obama, stern and determined as he spoke, pledged to slash the deficit in half by 2013 and said the budget he will present later this week "will look ahead 10 years."
"If we confront this crisis without also confronting the deficits that helped cause it we risk sinking into another crisis down the road," the president warned. "We cannot simply spend as we please and defer the consequences to the next budget, the next administration or the next generation."
"We will reinstate the pay as you go rule," he said. "You don't spend what you don't have."
At the conclusion of the sessions, Obama said there was bipartisan agreement on the need for action on the nation's Social Security program that acts as a national pension system. The rapid aging of the American population is putting huge strains on the financial base of the program.
The economy has consumed Obama since before he took office, but measurements of the country's financial health have only worsened dramatically as Obama pulled together his new administration, shepherded his $787 billion stimulus bill through Congress and battled to keep the nation's financial sector afloat.
And as he looks forward toward deficit reduction, Obama knows he's added vast amounts of federal spending to that indebtedness with the stimulus plan and untold outlays that still will be needed to prop up the wobbly banking and financial sectors. Obama also put the Treasury on the hook last week for $75 billion to ease the crisis in the American housing sector.
By trying to simultaneously tackle the unprecedented budget deficit, Obama steps out on an economic tightrope, counting on his ability to slash outlays through Iraq war spending cuts, tax hikes for wealthy Americans and cuts in government waste and inefficiency to start bringing down the national debt.
Also Monday, Obama named a career prosecutor to head the federal government's immigration enforcement operations.
If confirmed, John Morton would be the third federal prosecutor to head Immigration and Customs Enforcement, an agency in the Homeland Security Department. Morton is acting deputy assistant attorney of the Justice Department's Criminal Division.
Morton started his career as a trial attorney with the Justice Department in 1994 and has developed department policies for immigration crime -- including human smuggling and passport and visa fraud, according to Homeland Security's biography of him. In 2002 he coordinated the airport busts of nearly 100 people who lied on their applications to get security badges for restricted parts of Dulles International and Ronald Reagan National airports.