Obama Shifts Course with $3.5 Trillion Budget

President's budget proposes $989 billion in new taxes during the next 10 years.

ByABC News
February 26, 2009, 7:15 PM

Feb. 26, 2009— -- President Obama's $3.5 trillion budget proposal, the largest in history, presents a dramatic break from policy and a shift in governmental priorities. The administration is attempting to redirect vast sums of money from businesses and wealthier individuals to those with lower incomes and enact ambitious and costly new programs for energy, education and health care.

"I don't think that we can continue on our current course," Obama said in his remarks about the budget submitted to Congress this morning. "I work for the American people, and I'm determined to bring the change that the people voted for last November. And that means cutting what we don't need, to pay for what we do."

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The president says the budget proposal, entitled "A New Era of Responsibility: Renewing America's Promise," marks a departure from the past and makes tough choices about how to spend taxpayer money.

"We need to be honest with ourselves about what costs are being racked up, because that's how we'll come to grips with the hard choices that lie ahead," he said.

Obama's change begins with new priorities as outlined in his 2010 budget proposal, including $770 billion in tax cuts during the next 10 years for the middle-class, $150 billion for alternative energy sources and $634 billion for a health care reserve fund to pay for health care reform.

Much of the spending is being done with money the government does not have, creating a $1.75 trillion deficit next year alone.

"The president's beginning to make President Bush look like a piker when it comes to spending," House Minority Leader Rep. John Boehner of Ohio said.

Almost $1 trillion of the spending, $989 billion, comes from new taxes during the next 10 years. When the Bush administration's tax cuts expire at the end of 2010, new tax increases will target families earning more than $250,000 a year.

Obama's proposal will generate $636 billion in new taxes, $338 billion from allowing the Bush income tax cuts to expire, but also by increasing the capital gains tax and lowering the deduction for charitable giving.