White House unveils $3.8 trillion budget

The White House acknowledged that the federal government will run huge deficits for the foreseeable future, including a record $1.55 trillion deficit in 2010, although President Obama will try to reduce that figure to a still-staggering $1.2 trillion deficit in the budget he submits to Congress on Monday.

Trying to get a handle on spending while pushing for the economic recovery to continue, Mr. Obama will send Congress a $3.8 trillion budget for fiscal 2011 that administration officials describe as “pragmatic.” The plan freezes a large portion of domestic spending while renewing several tax cuts for middle-class households and boosting funds for education and energy initiatives.

The budget is likely to tee up an intense fight on Capitol Hill, where Mr. Obama is asking lawmakers to approve cutting or eliminating 120 federal programs in an election year. Several key Democratic leaders already have voiced opposition to some of the targets, such as eliminating future purchases of C-17 cargo planes and NASA’s Constellation mission to return astronauts to the moon.

But the cuts are part of the administration’s plan to reduce the deficit from 8.3 percent as a share of the economy next year to 3.9 percent in 2015. Other measures the White House is counting on: implementing Mr. Obama’s bank fee, which is expected to raise $90 billion over a decade; allowing the Bush tax cuts to expire for those earning more than $250,000, netting $700 billion over the same period; eliminating subsidies for fossil fuels for a savings of $40 billion; and freezing nonsecurity discretionary spending for three years, amounting to $250 billion.

Those steps would cut the deficit to $752 billion in five years, according to the Office of Management and Budget. The deficit would dip below $1 trillion the year after next, coming in at $828 billion in 2012.

It is important “to avoid the 1937 risk of acting too aggressively to bring down the deficit too quickly and throwing the economy back into recession,” OMB Director Peter R. Orszag said in a conference call with reporters. “What we attempted to achieve here was a fairly smooth glide path in reducing the deficit over the next several years down to levels that are reaching below 4 percent of the economy by 2015.”

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Rep. Paul D. Ryan, Wisconsin Republican and the senior GOP member on the House Budget Committee, said that reasoning doesn’t wash. He said Mr. Obama’s budget is “a plan for more of the same” with “a few cosmetic budget maneuvers to give the illusion of restraint.”

“For the duration of the administrations 10-year budget, the deficit never falls below $700 billion, and never falls below 3.6 percent of GDP - a level the administrations own budget director has called unsustainable. Debt held by the public doubles over five years, triples over 10, and exceeds 60 percent of GDP as a share of the economy this year - surpassing last years 50-year high,” Mr. Ryan said in a statement.

While the administration would allow the Bush tax cuts for higher-income taxpayers to expire, Mr. Orszag said the remainder would be kept. In addition, the budget recommends a one-year extension of Mr. Obama’s “Make Work Pay” tax cut.

Republicans have been fiercely critical of the administration’s record on spending and the deficit. On Friday, members of the House GOP sparred with Mr. Obama over his fiscal 2010 budget.

“You are soon to submit a new budget, Mr. President. Will that new budget, like your old budget, triple the national debt and continue to take us down the path of increasing the cost of government to almost 25 percent of our economy?” Rep. Jeb Hensarling, Texas Republican, asked Mr. Obama after his speech at the party’s retreat in Baltimore.

In a testy response, Mr. Obama blamed the current fiscal outlook on Republican policies, such as the Bush tax cuts that were deficit-financed and the massive Medicare Part D program that wasn’t paid for.

“We came in already with a $1.3 trillion deficit before I had passed any law. What is true is, we came in with $8 trillion worth of debt over the next decade,” Mr. Obama said. “Had nothing to do with anything that we had done.”

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