Obama unveils budget with $1.66 trillion deficit
01/02/2010 - 18:15:01President Barack Obama unveiled his new budget today, a plan that forecasts the government spending a record $1.66 trillion (€1.19 trillion) more than it takes in through taxes.
Mr Obama blamed the huge deficit on the decisions of President George Bush, previous Congresses and his administration's steps to prevent an economic collapse.
The president said in normal circumstances he would have worked to pay down the yearly deficit immediately, but costly steps were need to help an economy in free fall.
He asked politicians to follow his lead on reducing waste and to avoid "grandstanding".
The budget proposal reflects, as well, pressure on Mr Obama ahead of the November congressional elections to cut unprecedented growth in the US debt.
Mr Obama and the Democrats are trying to regain their political footing after the upset of losing of a Massachusetts Senate seat long held by the late Senator Edward Kennedy. That vote cost them their supermajority in Congress and appears to have indefinitely stalled efforts to pass health care reform legislation.
In the meantime Mr Obama pledged in his State of the Union address last week to make job creation his top priority.
After a protracted battle on health care dominated his first year in office and led to a string of Democratic election defeats, the administration hopes its new budget will convince Americans the president is focused on fixing the economy.
The 3.83 trillion (€2.75 trillion) budget includes a huge tranche to lower double-digit unemployment - about 100bn (€71.8bn) in tax incentives to hire workers and improve the nation's infrastructure and energy sector.
The spending jump will be partially offset by higher taxes on wealthy Americans - families earning more than 250,000 (€179,584) yearly - through plans to let expire tax cuts put in place during the administration of President Bush.
Mr Obama also seeks an overall freeze on the portion of government spending excluding commitments for Social Security and health care for the elderly as well as defense and homeland security.
As written, the spending plan's 1.56 trillion (€1.12 trillion) in red ink surpasses last year's then-record 1.41 trillion (€1.01 trillion) gap. It reflects a continuing flood of government spending designed to ease the worst economic downturn since the 1930s Great Depression.
Republicans complained about Mr Obama's proposed tax increases and said the huge projected deficits showed he had failed to get government spending under control. But administration officials argued that Mr Obama inherited a deficit already topping a trillion dollars when he took office.
Given the severity of the downturn, they say, the president had to spend billions more to stabilise the financial system while trying to pull the economy out of recession.
Mr Obama's job proposals would push government spending in the current fiscal year ending at the close of September to 3.72 trillion (€2.67 trillion), up 5.7% from last year. Mr Obama's blueprint for the 2011 budget year, which begins in October, would increase spending further to 3.83 trillion (€2.75 trillion), 3% higher than projected for this year.
Much of the spending surge over the past two years reflects the cost of the 787bn (€565.3bn) economic stimulus measure that Congress passed in February 2009.
Deficit growth reflects not only the increased spending but also a big drop in tax revenues as a result of the 7.2 million people who have lost jobs since the recession began and weaker corporate tax receipts.
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