The following is an exert from President Obama’s State of the Union Address on January 27th, 2010……..

Now if we had taken office in ordinary times, I would have liked nothing more than to start bringing down the deficit. But we took office amid a crisis, and our efforts to prevent a second Depression have added another $1 trillion to our national debt.

I am absolutely convinced that was the right thing to do. But families across the country are tightening their belts and making tough decisions. The federal government should do the same. So tonight, I’m proposing specific steps to pay for the $1 trillion that it took to rescue the economy last year.

Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will.

We will continue to go through the budget line by line to eliminate programs that we can’t afford and don’t work. We’ve already identified $20 billion in savings for next year. To help working families, we will extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can’t afford it.

Now, even after paying for what we spent on my watch, we will still face the massive deficit we had when I took office. More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. This can’t be one of those Washington gimmicks that lets us pretend we solved a problem. The Commission will have to provide a specific set of solutions by a certain deadline. Yesterday, the Senate blocked a bill that would have created this commission. So I will issue an executive order that will allow us to go forward, because I refuse to pass this problem on to another generation of Americans. And when the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason why we had record surpluses in the 1990s. I know that some in my own party will argue that we cannot address the deficit or freeze government spending when so many are still hurting. I agree, which is why this freeze will not take effect until next year, when the economy is stronger. But understand – if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery – all of which could have an even worse effect on our job growth and family incomes.

The CBO put out this piece in July 2010,  it outlines the problems in waiting to reduce spending and increase taxes.

Increasing Taxes and Reducing Spending
Austerity programs generally include both tax increases
and spending reductions. When fiscal crises occur during
recessions, as they often do, such policy changes can
exacerbate the economic downturns—although some
studies suggest that certain types of fiscal austerity programs
tend, at least in some circumstances, to stimulate
economic growth.
The later that actions are taken to address persistent
budget imbalances, the more severe they will have to be.
CBO’s long-term projections for the federal budget
indicate that an immediate, permanent cut in spending
or increase in revenues equal to about 1 percent of GDP
(relative to the policies assumed for the extended-baseline
scenario) or about 5 percent of GDP (relative to the
policies assumed for the alternative fiscal scenario) would
prevent a net increase in the U.S. debt-to-GDP ratio over
the next 25 years. The latter would be equivalent to
roughly 20 percent of all of the government’s noninterest
spending this year. Actions taken later, particularly if
there was a fiscal crisis, would need to be significantly
greater to achieve that same objective. Larger and more
abrupt changes in fiscal policy, such as substantial cuts in
government benefit programs, would be more difficult
for people to adjust to than smaller and more gradual
changes.