Debate Heats Up on How to Save Economy

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WASHINGTON - Each month economists search for signs the economy is stabilizing and each month come up empty handed.

On Friday, the Commerce Department announced the economy shrank 5.4 percent in the fourth quarter last year, sharply worse than the department's initial estimate.

Click the player to watch the report from CBN News Washington Correspondent Jennifer Wishon followed by Gordon Robertson's comments on the Obama's administration's efforts to fix the economy.

That news caps off a week riddled with somber figures.

This week, the number of Americans seeking unemployment benefits soared to a record high of 5 million. Men and women claiming benefits for the first time hit 667,000.

Also, new home sales fell more than ten percent, and to make matters worse, last month home prices fell nearly ten percent.

"Just as a family has to make hard choices about where to spend and where to save, so do we as a government," President Obama said Thursday, while announcing his budget blueprint.

Obama is using his $3.5 trillion budget released Thursday as a tool to fight the recession.

"I think in most people's mind they'd much rather see a large deficit and lower unemployment than be sitting there with 20 percent unemployment and very happy because we have a balanced budget," Dean Baker, with the Center for Economic Policy Research, said.

The President proposes investing billions in renewable energy programs and building a fund to reform healthcare. There's also a $750-billion "placeholder" built in case more financial institutions need rescuing.

"Where's the restraint in spending?" Sen. Judd Gregg, R-N.H., questioned.

Nearly $1 trillion of Obama's budget is made up of new taxes over the next ten years, most of them levied on families making more than $250,000 a year.

As part of that, the President would reduce the rate by which some Americans deduct charitable contributions from their taxes. That proposal is already causing a stir on Capitol Hill.

"If you look at small businesses, family farms, middle class families, retirees, charities, everyone with a 401k and anyone who flips on a light switch is going to pay higher taxes under this plan," House Minority Leader John Boehner, R-Ohio, said.

Republicans on the House and Senate budget committees have already broken the plan down into the good, the bad, and the ugly.

"We're increasing spending on domestic bureaucracies by 9.3 percent," Pep. Paul Ryan, R-Wisc., said. Name me a family budget or a small business budget that gets to have an increase like that."

The fight will likely drag on for months as lawmakers wait for more details of the President's budget and search for signs of a stabilizing economy.

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Jennifer Wishon

CBN News Washington Correspondent

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