Obama called his new budget one of “tough choices and sacrifices” but most of those cuts would be held off until after the end of his first term.
Overall, Obama proposed trimming the deficits by $1.1 trillion over a decade. The administration is projecting that the deficit will hit an all-time high of $1.65 trillion this year and then drop sharply to $1.1 trillion in 2012, with an expected improvement in the economy and as reductions in Social Security withholding and business taxes expire.
Obama's 2012 budget would actually add $8 billion to the projected deficit for that year because the bulk of the savings he would achieve through a freeze in many domestic programs would be devoted to increased spending in areas Obama considers priorities, such as education, clean energy and high-speed rail.
“We have more work to do to live up to our promise by repairing the damage this brutal recession has inflicted on our people,” Obama said.
The president went to a middle school outside of Baltimore to highlight the education initiatives in his budget and told the crowd, “We can't sacrifice our future.”
Republicans, who took control of the House in the November elections and picked up seats in the Senate in part because of voter anger over the soaring deficits, called Obama's efforts too timid.
The $14 trillion national debt — the cumulative total of deficits since the beginning of the Republic — would grow to $16.7 trillion by Sept. 30, 2012, Obama's budget projects. Much of that debt is owed to China.
The Obama budget plan, which is certain to be changed by Congress, would spend $3.73 trillion in the 2012 budget year, which begins Oct. 1, a reduction of 2.4 percent from what Obama projects will be spent in the current budget year.
Of the $1.1 trillion in deficit savings that Obama is projecting over the next 10 years, two-thirds would come from spending cuts, including $400 billion in savings from a five-year freeze on domestic programs that account for one-tenth of the budget. The other one-third of deficit savings would come from tax increases such as limiting the tax deductions taken by high income taxpayers, a proposal that Obama put forward last year only to have it rejected by Congress. Obama also proposes raising taxes on energy companies.
The budget projects that the deficits will total $7.21 trillion over the next decade with the imbalances never falling below $607 billion. Even then that would exceed the deficit record before Obama took office of $458.6 billion in 2008, President George W. Bush's last year in office.
The budget proposes program terminations or spending reductions for more than 200 programs at an estimated savings of $33 billion in 2012. Programs targeted for large cuts include Community Development Block Grants, trimmed by $300 million. A program that helps pay heating bills for low-income families would be cut in half for a savings of $2.5 billion. Another program supporting environmental restoration of the Great Lakes would be reduced by one-fourth for $125 million in savings.
The biggest tax hike would come from a proposal to trim the deductions the wealthiest Americans can claim for charitable contributions, mortgage interest and state and local tax payments. The administration proposed this tax hike last year but it was a nonstarter in Congress.
Obama's budget would also raise $46 billion over 10 years by eliminating various tax breaks to oil, gas and coal companies.
While Obama's budget avoided painful choices in entitlement programs, it did call for $78 billion in reductions to Pentagon spending over five years.