WASHINGTON — The Obama administration has alerted domestic agencies to plan for a budget freeze or even 5 percent cuts, part of a push to rein in record deficits.
With China, the largest foreign holder of US Treasury bonds, having recently expressed concern over the size of US deficits, policymakers fear that foreign investors may cut back on their purchases of Treasury debt.
White House Budget Director Peter Orszag yesterday called it imperative that the flow of red ink be curbed in coming years, so as not to erode the fledgling economic recovery and raise interest rates.
But he called any action taken part of a balancing act — and warned that acting too fast could undercut the recovery.
He also declined to comment on the specifics of the budget to be unveiled in February.