The bailout of the U.S. financial system will send the budget deficit soaring toward $1 trillion this year, President-elect Barack Obama said yesterday, and the red ink stands to get substantially deeper if Obama wins approval of a massive economic stimulus plan.

Even if the package of spending and tax cuts helps restore the nation's immediate economic health, Obama said, the government is likely to be left with "trillion-dollar deficits for years to come" unless policymakers "make a change in the way that Washington does business."

"We're going to have to stop talking about budget reform. We're going to have to totally embrace it. It's an absolute necessity," the president-elect told reporters a day before the Congressional Budget Office is set to release its outlook for the coming year.

Obama faces the twin challenges of managing the deficit, the annual gap between tax revenues and spending, and the swelling national debt, the amount of money that the government has borrowed to finance years of deficits. His task is made all the more difficult because new spending is widely viewed as the best way to pull the nation out of the recession.

While Obama has declined to say how he intends to deal with such challenges, an economic adviser said yesterday that the president-elect plans to unveil "major initiatives" designed to eventually bring the deficit under control as part of his first budget proposal, which he will submit to Congress next month.

Obama also has scheduled a news conference for today to make a "personnel announcement" related to budget reform, aides said.

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/06/AR2009010602849_pf.html