Official: Budget projects $1.75 trillion deficit

From msnbc news at Feb. 26, 2009,President Barack Obama is sending Congress a budget Thursday that projects the government's deficit for this year will soar to $1.75 trillion, reflecting efforts to pull the nation out of a deep recession and a severe financial crisis.

A senior administration official told The Associated Press that Obama's $3 trillion-plus spending blueprint also asks Congress to raise taxes on the wealthy in 2011 and cut Medicare costs to provide health care for the uninsured.

The new budget also plans for additional financial bailouts of up to $750 billion, a senior administration official told NBC News. But the White House believes that as the economy improves it will get roughly $500 billion back, so the expected cost to taxpayers is $250 billion. 

The official told The Associated Press that the administration felt it would be prudent to ask for additional resources to deal with the financial crisis, the most severe to hit the country in seven decades. He called the request a "placeholder" in advance of a determination by the Treasury Department of what extra resources will actually be needed.

The spending blueprint Obama is sending Congress is a 140-page outline, with the complete details scheduled to come in mid- to late April, when the new administration sends up the massive budget books that will flesh out the plan.

Fierce debate likely However, the submission of the bare budget outline was certain to set off fierce debate in Congress over Obama's spending and tax priorities. The budget document includes additional requests for the current year and Obama's proposals the 2010 budget year, which begins Oct. 1.

The president wants Congress to extend the $400 annual tax cut due to start showing up in workers' paychecks in April, and it extends the tax cuts passed in 2001 and 2003 for couples earning less than $250,000 per year. Those tax cuts were due to expire at the end of 2010.

To pay for the middle-class tax relief and the effort to increase health coverage, Obama's budget makes significant cuts on the rate of growth in other areas of health care seeks to trim a variety of other government programs, including subsidies earned by farmers with revenue of more than $500,000 a year.

The budget would also seek savings in military weapons purchases. It would raise taxes on wealthy hedge fund managers and corporations, eliminating tax incentives U.S. companies now have to move jobs overseas, something Obama repeatedly mentioned during the presidential campaign.

Even with all the savings, the cost of the $787 billion economic stimulus bill will push the deficit for this year to $1.75 trillion, a level — as a percentage of the economy — not seen since World War II. The deficit is expected to remain around $1 trillion for the next two years before starting to decline to $533 billion in 2013, according to budget projections.

Obama's plan proposes achieving $634 billion in savings on projected health care spending and diverting those resources to expanding coverage for uninsured Americans. The $634 billion represents a little more than half the money that would be needed to extend health insurance to all of the 48 million Americans now uninsured.
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