US vies to set G-20 meeting’s agenda

WASHINGTON (AP) — With trillion-dollar deficits and a weakening dollar, the United States doesn’t have the clout it once had at economic summits. Now Germany, France and all the new kids at the table — countries like China and Brazil — are pushing their own issues.

As the global crisis eases and nations are no longer gripped by fear, President Barack Obama faces major problems in shaping an outcome that will convince U.S. voters that they will see benefits from discussions on Thursday and Friday in Pittsburgh.

Obama is pushing the Group of 20 leading industrial nations to make sweeping changes in how they run their economies in the years ahead. The goal is to combat the dangerous imbalances that many believe sowed the seeds of the recent financial crisis and severe global downturn.

The initiative would require chronic trade deficit nations such as the United States to boost their savings rates to consume fewer imports and for trade surplus countries such as China to get their consumers to spend more and rely less on export-led growth.

“We can’t go back to an era where the Chinese or the Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling them anything,” Obama said in a CNN interview broadcast Sunday.

Americans’ personal savings rate has been rising in current hard times as households cut back on spending and try to repair their cracked nest eggs, but the problem is that the U.S. budget deficit, a barometer of overall national savings, has been soaring, raising alarm bells in countries such as China, the largest foreign holder of U.S. government debt.

The administration is projecting that the deficit for this budget year, which ends Sept. 30, will total an eye-popping $1.58 trillion, more than three times the deficit for last year, which at the time seemed breathtaking at a record $455 billion.

The deficit has been driven to stratospheric heights by the billions of dollars being spent to stabilize the U.S. banking system and jump-start the economy. The administration says the economic outlook would be far bleaker if that money had not been spent, but the soaring U.S. deficits — projected to total $9 trillion over the next decade — are making Obama’s G-20 colleagues nervous.

China, the largest foreign owner of U.S. Treasury securities, has not been shy about voicing worries that the U.S. deficits, unless brought under control, will undermine the value of its $800 billion in Treasury bonds.

The Chinese worry that the dollar, which has been sliding to its weakest levels in a year, will weaken further, making their holdings worth less and that all the U.S. debt could trigger inflation in the U.S. that would further undermine their investments.

While a U.S. commitment to rebalance the global economy by getting the country’s budget deficits under control would address Chinese concerns, Chinese officials are worried that the rebalancing pledge could be used as a club by other countries to attack their trade surplus policies.

The United States has sought to win a Chinese commitment to the plan by pushing to obtain a greater role for China and other emerging economies in global financial institutions like the International Monetary Fund.