Obama admits plans face delay

Barack Obama acknowledged for the first time ­on Tuesday that the financial crisis could force him to rein in his ambitious spending plans as the proposed $700bn bail-out of Wall Street threatens to plunge the government deeper into debt.

The Democratic presidential candidate said he hoped that much of the public money committed to the financial sector would be recovered, but said it was likely some of his spending plans would be delayed.

"Does that mean I can do everything that I've called for in this campaign right away? Probably not," he told NBC's Today programme. "I think we're going to have to phase it in."

His remarks reflected a growing realisation that the financial crisis – and the government's costly response to it – has transformed the fiscal landscape for the next president and thrown both candidates' economic programmes into doubt. The US was facing a record $480bn (€327bn, £259bn) budget deficit next year even before recent events, and the proposed bail-out threatens to push it to more than $1,000bn.

Both candidates would be constrained by the crisis. Mr Obama wants to commit an additional $130bn a year to an array of new federal programmes while cutting taxes on the middle classes by $80bn. The shopping list includes $65bn on healthcare, $18bn on education and $15bn on green energy ­initiatives.

His Republican opponent John McCain, for his part, plans a sharp cut in corporate taxes that could reduce federal revenues by up to $300bn a year.

Mr Obama plans to help fund his proposals by raising taxes on people earning more than $250,000 but he acknowledged this month that rate increases might have to wait until the economy has stabilised.

The ballooning deficit will also make it hard for candidates to fulfil tax cut pledges, although Mr Obama says he remains committed to his plan to lower rates for more than 90 per cent of taxpayers.

Mr Obama said it was still unclear how much the bail-out would cost taxpayers and what its impact would be on the budget.

"Although we are potentially providing $700bn in available money to the Treasury, we don't anticipate that all that money gets spent right away and we don't anticipate that all that money is lost. How we're going to structure that in budget terms still has to be decided," he said.

Opinion polls have so far shown Mr Obama benefiting from the crisis by refocusing attention on the struggling economy and the failures of the incumbent Republican administration.

An average of recent polls gives him a lead of about 3 percentage points, although surveys in key battleground states reveal a more mixed picture. Mr McCain is ahead in the crucial states of Florida and, by most accounts, Ohio and Virginia by very slim margins.

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