- Associated Press - Monday, February 14, 2011

WASHINGTON (AP) — President Obama has sent Congress a $3.73 trillion budget that holds out the prospect of eventually bringing deficits under control through spending cuts and tax increases. But the fiscal blueprint largely ignores his own deficit commission’s recommendations to slash huge entitlement programs like Social Security and Medicare.

Mr. 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, Mr. Obama proposed trimming the deficits by $1.1 trillion over a decade although his changes would actually add to the deficits this year and next. Mr. Obama is projecting 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 disappear.

Jacob Lew, Obama’s budget director, said that the president’s spending proposal was a balanced package of spending cuts and “shared sacrifice” that would bring the deficits under control. Appearing on ABC’s “Good Morning America,” Mr. Lew said that Mr. Obama’s budget would “stand the test that we live within our means and we invest in the future.”

Senior administration officials, who spoke on the condition of anonymity in advance of the formal release of the budget, said that Mr. Obama would achieve two-thirds of his projected $1.1 trillion in deficit savings through spending cuts including a five-year freeze on many domestic programs.

The other one-third of the savings would come from tax increases, including limiting tax deductions for high income taxpayers, a proposal Mr. Obama put forward last year only to have it rejected in Congress.

The Obama budget recommendation, 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 Mr. Obama projects will be spent in the current budget year.

The Obama plan would fall far short of the $4 trillion in deficit cuts recommended in a December report by his blue-ribbon deficit commission. That panel said that real progress on the deficit cannot be made without tackling the government’s big three entitlement programs — Medicare, Medicaid and Social Security — and defense spending.

Mr. Obama concentrated his cuts in the one-tenth of the budget that covers most domestic agencies, projecting $400 billion in savings from a five-year freeze in this area. Some programs would not just see spending frozen at 2010 spending levels but would be targeted for sizable cuts.

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. They want spending frozen at 2008 levels before efforts to fight a deep recession boosted spending in the past two years.

They are scheduled to begin debating on Tuesday a proposal that would trim spending by $61 billion for the seven months left in the current budget year, which ends Sept. 30. They also have vowed to push for tougher cuts in 2012 and future years.

“Americans don’t want a spending freeze at unsustainable levels,” said Senate Republican leader Mitch McConnell. “They want cuts, dramatic cuts.”

The president’s projected $1.65 trillion deficit for the current year would be the highest dollar amount ever, surpassing the $1.41 trillion deficit hit in 2009. It would also represent 10.8 percent of the total economy, the highest level since the deficit stood at 21.5 percent of gross domestic product in 1945, reflecting heavy borrowing to fight World War II.

The president’s 2012 budget projects that the deficits will total $7.21 trillion over the next decade with the imbalances never falling lower below $607 billion, a figure that would still exceed the previous deficit record before Mr. Obama took office of $458.6 billion in 2008, President George W. Bush’s last year in office.

Administration officials project that the deficits will be trimmed to 3.2 percent of GDP by 2015 — one-third of the projected 2011 imbalance and a level they said was sustainable.

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