WASHINGTON - President Barack Obama is sending Congress abudget Thursday that projects the government's deficit for thisyear will soar to $1.75 trillion, reflecting efforts to pull thenation out of a deep recession and a severe financial crisis.
A senior administration official told The Associated Press thatObama's $3 trillion-plus spending blueprint also asks Congress toraise taxes on the wealthy in 2011 and cut Medicare costs toprovide health care for the uninsured.
The president's first budget also holds out the possibility ofspending $250 billion more for additional financial industry rescueefforts on top of the $700 billion that Congress has alreadyauthorized, according to this official, who spoke on condition ofanonymity before the formal release of the budget.
The official said the administration felt it would be prudent toask for additional resources to deal with the financial crisis, themost severe to hit the country in seven decades. He called therequest a "placeholder" in advance of a determination by the Treasury Department of what extra resources will actually beneeded.
The spending blueprint Obama is sending Congress is a 140-pageoutline, with the complete details scheduled to come in mid- tolate April, when the new administration sends up the massive budgetbooks that will flesh out the plan.
However, the submission of the bare budget outline was certainto set off fierce debate in Congress over Obama's spending and taxpriorities. The budget document includes additional requests forthe current year and Obama's proposals the 2010 budget year, whichbegins Oct. 1.
The president wants Congress to extend the $400 annual tax cutdue to start showing up in workers' paychecks in April, and itextends the tax cuts passed in 2001 and 2003 for couples earningless than $250,000 per year. Those tax cuts were due to expire atthe end of 2010.
To pay for the middle-class tax relief and the effort toincrease health coverage, Obama's budget makes significant cuts onthe rate of growth in other areas of health care and seeks to trima variety of other government programs, including subsidies earnedby farmers with revenue of more than $500,000 a year.
The budget would also seek savings in military weaponspurchases. It would raise taxes on wealthy hedge fund managers andcorporations, eliminating tax incentives U.S. companies now have tomove jobs overseas, something Obama repeatedly mentioned during thepresidential campaign.
Even with all the savings, the cost of the $787 billion economicstimulus bill will push the deficit for this year to $1.75trillion, a level -- as a percentage of the economy -- not seen since World War II. The deficit is expected to remain around $1 trillionfor the next two years before starting to decline to $533 billionin 2013, according to budget projections.
Obama's plan proposes achieving $634 billion in savings onprojected health care spending and diverting those resources toexpanding coverage for uninsured Americans. The $634 billionrepresents a little more than half the money that would be neededto extend health insurance to all of the 48 million Americans nowuninsured.
Americans now spend a total of $2.4 trillion a year on healthcare.
Obama also will ask for an additional $75 billion to cover thecosts of wars in Iraq and Afghanistan through September, the end ofthe current budget year. That would be on top of the $40 billionalready appropriated by Congress, the administration official said.
The administration will also ask for $130 billion for Iraq andAfghanistan in 2010 and will budget the costs of operations in Iraqand Afghanistan at $50 billion annually over the next severalyears.
Obama's budget proposal would effectively raise income taxes andcurb tax deductions on couples making more than $250,000 a year,beginning in 2011. By not extending former President George W.Bush's tax cuts for such wealthier filers, Obama would allow themarginal rate on household incomes above $250,000 to rise from 35percent to 39.6 percent.
The plan also contains a contentious proposal to raise hundredsof billions of dollars by auctioning off permits to exceed carbonemissions caps, which Obama wants to impose on users of fossilfuels to address global warming.
Some of the revenues from the pollution permits would be used toextend the "Making Work Pay" tax credit of $400 for individualsand $800 for couples beyond 2010, as provided in the just-passedeconomic stimulus bill.
About half of what officials characterized as a $634 billion"down payment" toward health care coverage for every Americanwould come from cuts in Medicare. That is sure to incite battleswith doctors, hospitals, health insurance companies and drugmanufacturers.
Some of the Medicare savings would come from scaling backpayments to private insurance plans that serve older Americans,which many analysts believe to be inflated. Other proposals includecharging upper-income beneficiaries a higher premium for Medicare'sprescription drug coverage.
To raise the other half, Obama wants to reduce the rate by whichwealthier people can cut their taxes through deductions formortgage interest, charitable contributions, local taxes and otherexpenses to 28 cents on the dollar, rather than the 35 cents theycan claim now. Even more money would be raised if the top ratereverts to 39.6 percent, as Obama wants.
Sen. Max Baucus, D-Mont., chairman of the Senate FinanceCommittee, called Obama's proposal to tax the wealthy to financehealth care reform a starting point. But he wants to also examinetaxing some of health insurance benefits provided by employers -- anidea rejected by Obama in last year's presidential campaign.
Budget documents provided to The Associated Press show thatObama will not lay out a detailed blueprint for a health careoverhaul, but a set of broad policy principles and some specificideas for how to raise a big chunk of the money.
Obama's promise to phase out direct payments to farmingoperations with revenues above $500,000 a year is sure to causeconcerns among rural Democrats.
Even after all those difficult choices, cutting about $2trillion from the budget over 10 years, Obama's budget still wouldfeature huge deficits.
The $1.75 trillion deficit projected for this year wouldrepresent 12.3 percent of the gross domestic product, double theprevious post-war record of 6 percent in 1983, when Ronald Reaganwas president, and the highest level since the deficit totaled 21.5percent of GDP in 1945, at the end of World War II.
At $533 billion, the deficit in 2013 will be about 3 percent ofthe size of the economy, a level that administration officials saidwould be manageable.