WASHINGTON — President Barack Obama declared in presenting his new 10-year budget proposal on Monday that “our fiscal situation remains unacceptable,” but he insisted that the country pursue his ambitious domestic agenda despite facing swollen budget deficits for the foreseeable future.
“Just as it would be a terrible mistake to borrow against our children’s future to pay our way today, it would be equally wrong to neglect their future by failing to invest in areas that will determine our economic success in this new century,” Obama said at the White House.
The budget projects that the deficit will peak at nearly $1.6 trillion in the current fiscal year, a post-World War II record, and then decline but remain at economically troublesome levels over the remainder of the decade. In the coming fiscal year 2011, which begins in October, the projected shortfall would be under $1.3 trillion.
Over 10 years, according to the administration, the budget would save an estimated $1.2 trillion, mainly by ending the Bush tax cuts for the richest Americans and freezing some domestic spending for three years. But that total is roughly one-fifth of the size of the debt that will pile up from now to 2020, the budget shows.
In the short run, some relatively minor domestic programs as well as big-ticket military equipment would be cut or eliminated, while education and civilian research would get big increases. Wealthy Americans, big banks and oil and gas companies would pay more in taxes, but the middle class and small businesses would get additional tax cuts worth hundreds of billions of dollars.
Republican leaders in Congress, in a flurry of news releases, dismissed the Obama budget with the identical phrase: “more of the same.”
“More spending, more taxes and more debt,” added Sen. Mitch McConnell of Kentucky, the Senate Republican leader.
But Obama, in the budget message accompanying the fiscal volumes, said most of the debt owes to the spending and tax cuts of the past decade when Republicans controlled both the White House and Congress. He took credit for having made “hard choices and painful trade-offs not seen in Washington for many years.”
Obama’s budget director, Peter R. Orszag, said the president would keep his campaign promise to cut the deficit he inherited in half by the end of his term. By the administration’s calculation, the deficit for fiscal year 2013 will be equal to just over 4 percent of the gross domestic product. When Obama took office, the projected $1.3 trillion deficit was equivalent to more than 9 percent of the gross domestic product.
Even so, the president’s budget shows that by the end of the decade, annual deficits will begin moving up inexorably, reflecting the fast-rising costs of health and retirement programs for an aging baby-boom population.
Economists generally say annual deficits should not consistently exceed 3 percent.