Budget projects deficit will quadruple, jump to $1.75T

WASHINGTON -- Federal deficits would remain above $500 billion annually for the next decade under the budget proposed by President Obama Thursday, sending the federal debt soaring to $23 trillion by 2019.

The deficit this year would jump to a record $1.75 trillion, nearly quadrupling the 2008 figure.

Obama has added a $250 billion reserve fund to support up to $750 billion in additional asset purchases from banks and other financial institutions. That would more than double the current $700 billion effort.

The Democratic president's first budget, which will be fleshed out during the next two months, differs dramatically from those of his Republican predecessor.

The most dramatic change: inclusion of a $634 billion reserve fund to jump-start an overhaul of the nation's health care system, to be financed equally by savings in Medicare and tax increases on those earning more than $250,000 a year.

Obama would extend the "Making Work Pay" tax cut of $400 for individuals and $800 for families that was included in the two-year, $787 billion economic stimulus plan for at least the next decade, at a cost of nearly $1 trillion. He would pay for much of it with presumed revenue from a "cap-and-trade" system for industrial emissions.

In addition to raising taxes on those earning more than $250,000, Obama counts on savings from winding down the war in Iraq — nearly $1.5 trillion over 10 years. But Republicans contend those savings are from an unrealistic baseline that assumes the war would otherwise rage on at 2009 levels.

In a mid-morning appearance at the White House, Obama said his budget "is an honest accounting of where we are and where we are going."

He noted that his administration "inherited" a deficit of more than $1 trillion from the Bush administration and has to spend heavily to jump-start the economy.

"While we must add to our deficits in the short term to provide immediate relief to families and get our economy moving, it is only by restoring fiscal discipline over the long run that we can produce sustained growth and shared prosperity," Obama said. "And that is precisely the purpose of the budget I'm submitting to Congress today."