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Obama Vows to Cut Waste in Government Spending

March 4, 2009 at 6:00 PM EDT
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Kwame Holman recaps the day's economic news, including President Barack Obama's new campaign against wasteful government spending and reactions to a plan for massive new spending on the economy.

JIM LEHRER: President Obama opened a new campaign today against government waste to go with his plan for massive new spending on the economy. NewsHour correspondent Kwame Holman has our lead story report.

KWAME HOLMAN: The president laid out plans to transform the way federal contracts are awarded and save $40 billion a year. He said the existing system is rife with abuse.

U.S. PRESIDENT BARACK OBAMA: Over the last eight years, government spending on contracts has doubled to over $500 billion. Far too often, the spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability.

We are spending money on things that we don’t need, and we are paying more than we need to pay, and that’s completely unacceptable.

KWAME HOLMAN: Mr. Obama was joined by administration officials and a bipartisan group of lawmakers. He said reforms are long overdue, and he ordered cabinet officials to develop new guidelines on contracting by the end of September.

He also called for an end to no-bid contracts in order to foster competition for government-paid work.

The president zeroed in on defense contracts, pointing to a Government Accountability Office review last year. It found cost overruns of $295 billion in 95 major projects.

BARACK OBAMA: If a system isn’t ready to be developed, we shouldn’t pour resources into it. And if a system is plagued by cost overruns, it should be reformed. No more excuses; no more delays. The days of giving defense contractors a blank check are over.

KWAME HOLMAN: The theme was reinforced at a separate event by Janet Napolitano, secretary of homeland security, and Tom Vilsack, the secretary of agriculture.

TOM VILSACK, secretary of agriculture: What the taxpayers need to know is that every single department of government has now been charged by the president to review in detail the nature of contracts that we’ve entered into in order to do what American families are doing. American families are sitting down today and trying to decide, “How do we save money? How do we eliminate unnecessary spending?” Their expectation is the government does the same.

Lawmakers criticize spending bill

KWAME HOLMAN: But in Congress, Republicans and a few moderate Democrats criticized the president for planning to sign a huge spending bill full of special projects. It would fund the government for the rest of the fiscal year.

REP. MARY FALLIN, R-Okla.: President Obama promised that he would go line by line in the budget and that he would eliminate wasteful spending. And what we have seen is an omnibus bill that has come forth with $410 billion of spending, with 9,000 earmarks in it, that were airdropped in the middle of the night, where we didn't even have time to even read that piece of legislation because it came through so quickly.

KWAME HOLMAN: White House officials have said the bill is last year's business. They say the president will aggressively oppose earmarks in future spending.

But Democratic leaders, including House Majority Leader Steny Hoyer, warned this week against any wholesale ban on earmarks. Hoyer said, "I don't think the White House has the ability to tell us what to do."

White House press secretary Robert Gibbs was asked about that today.

ROBERT GIBBS, White House press secretary: The president believes the best way to reduce wasteful spending is to work with Congress in order to do that. We've seen throughout the past few years that the amount and the number of earmarks in legislation has been cut significantly. The president believes we can do even more and looks forward to working with Congress to ensure that that happens.

KWAME HOLMAN: The Obama team also sought progress on the housing front, as the Treasury Department detailed its $75 billion plan to help people fend off foreclosure. Up to 4 million borrowers will be eligible to have their mortgages modified one time, if their properties are worth less than $730,000.

Another 5 million will be able to refinance mortgages held by the government-run Fannie Mae and Freddie Mac.

Housing also was at the heart of a new report by the Federal Reserve. It found steep declines in factory output of everything from furniture to construction gear.

Even so, Wall Street finally rallied, partly on the home foreclosure plan and partly on bargain-hunting. The Dow Jones industrial average gained nearly 150 points to close above 6,875. The Nasdaq rose 32 points to end at 1,353.