Economy, Budget Deficit | featured news

The wrangling of President Barack Obama and congressional Republicans over the federal budget underscores a clash of core philosophies about how the economy works that supersedes any skirmish on taxes or spending cuts.

The International Monetary Fund cut its forecast for U.S. economic growth on Friday and warned Washington and debt-ridden European countries that they are "playing with fire" unless they take immediate steps to reduce their budget deficits.

Dow plummets nearly 220 points after trade deficit unexpectedly widens and reports from Asia, Europe spurs concerns recovery is veering off track.

Government economic forecasters say President Obama's healthcare overhaul will increase the nation's healthcare tab instead of bringing costs down. The report by economic experts at the Department of Health and Human Services, released late Thursday, says the healthcare remake will achieve Obama's aim of expanding coverage.

On the recession's front lines, governors are struggling to chart the road ahead for states staggered by unrelenting joblessness and cut-to-the-bone budgets even as Washington reports signs of economic growth.

"The worst probably is yet to come," warned Gov. Jim Douglas, R-Vt., chairman of the National Governors Association, at the group's meeting Saturday. He called the situation "fairly poor" in most states, adding that it "doesn't look too good."

Administration estimates record-setting amount will drop to $1.3 trillion in 2011; Obama's proposed $3.8 trillion budget focuses on economy.

President Barack Obama renewed his pledge on Saturday to make job creation his top priority in 2010 but said it was also critical to rein in a record budget deficit that threatened economic recovery.

President Obama goes before Congress for his first State of the Union address Wednesday night to show he can boost the economy and create jobs this year while cutting the budget deficit in 2011.

The U.S. economy is no longer on the edge of collapse, but Americans must reduce the budget deficit, Treasury Secretary Timothy Geithner said Sunday.

Washington Post-ABC News Poll | Public view of president slips on key issues, such as health-care reform, economy and federal budget deficit.