President Obama sent Congress a $3.8 trillion budget Monday for fiscal year 2011, pushing a plan that includes new jobs-creation programs but is projected to add nearly $1.3 trillion in deficit spending on top of the current year's projected $1.6 trillion deficit.
According to the plan, the 2011 deficit of $1.267 trillion would fund nearly the entirety of the year's discretionary spending, which is $1.415 trillion or 37 percent of the government's total outlays. Mandatory spending on items such as entitlements and interest payments make up the rest.
The Senate moved last week to extend the nation's debt limit to $14.3 trillion to accommodate the projected gap for the current spending year, which ends Sept. 30, but with another $1.3 trillion hole next year, the nation's debt could reach $15.6 trillion by Oct. 1, 2011. That would surpass the nation's annual gross domestic product.
A $1.6 trillion deficit would represent 10.6 percent of current GDP, while 2011's budget deficit would be 8. 3 percent of GDP. The White House says over the next 10 years, the average deficit will represent only 4.5 percent of GDP annually. Last year's deficit was $1.42 trillion.
Obama on Monday blamed much of the nation's budget woes on tax cuts passed under the prior administration, as well as the Iraq and Afghanistan wars and other programs. He called for reining in the budget over time, but said the need to help Americans hurting from the economic downturn makes that difficult to do right away.
"We have to do what families across America are doing -- save where we can, so that we can afford what we need," Obama said. "We won't be able to bring down this deficit overnight."
According to White House estimates, the budget's deficit for fiscal year 2013 would drop to $700 billion before jumping back up to $1 trillion in 2020, the furthest out that budgeters will predict.
Though Obama has pushed spending well above the levels he inherited from his predecessor, White House Budget Director Peter Orszag highlighted multi-billion-dollar cuts the administration made in the proposed budget to keep the deficit from rising any higher.
"There was a significant increase in spending that was projected before we even took office," Orszag told Fox News. "All in, we have more than a trillion dollars in deficit reduction over the next decade."
In the proposed budget, the White House is touting $20 billion in cuts and savings.
But those savings are offset by increases elsewhere. For instance, the administration is budgeting a $20 billion increase in certain education funding -- a $17 billion increase for Pell Grant funding and a $3 billion increase for programs under the Elementary and Secondary Education Act.
Sen. Judd Gregg, R-N.H., ranking Republican on the Senate Budget Committee, said the White House is not going far enough in tackling the debt crisis.
"We've got some pretty big problems here. We need some pretty big solutions," Gregg told Fox News. "This is fiscal insanity -- to continue to grow the government the way we're growing it, to continue to spend the way we're spending. ... We're going to pass onto our kids a country that basically is insolvent."
The budget assumes unemployment will remain high in the near future. It projects 10 percent unemployment on average for 2010 and 9.2 percent unemployment for 2011. It projects a 3.8 percent increase in GDP in 2011, compared with a 2.7 percent increase this year.
And like last year, the budget includes a limit on charitable and mortgage deductions for families making more than $250,000 a year. The measure is expected to bring in $291 billion over the next decade.
The numbers come as the president and congressional Democrats have pivoted from preparing a $1 trillion health care proposal to focusing on jobs and the deficit. Speaking at the State of the Union last week, Obama told a joint session of Congress that he wants to freeze spending -- beginning in 2011 -- on discretionary spending except the military, veterans and homeland security. The president said that would save $250 billion over 10 years.
The budget also includes a freeze on pay for White House senior staff.
"There's a three-year discretionary spending freeze and that is to say there is a three-year cap on domestic discretionary spending," said Obama senior adviser David Axelrod on CNN. "Within that cap we're going to have to prioritize just like every business or every family would, so we're going to have to do away with the things that we don't need in order to pay for the things that we do."
But keeping budget deficits where they are currently projected will happen only if tax cuts passed in 2001 and 2003 expire as scheduled at the end of this year. The White House calculates tax hikes would generate $1.2 trillion in revenue over 10 years.
"We just did an 84 percent increase in a very short period of time of all this new spending. Democrats, since they took over Congress, increased domestic discretionary spending by $1.4 trillion," Rep. Paul Ryan, R-Wis., said on "Fox News Sunday."
"We don't think taking all this money out of the private economy up to Washington and spending it through Washington is the way to create jobs. We believe we should keep that money in the economy," Ryan added.
Congressional sources say Obama's new budget will propose extending the popular middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year.
It also calls for $250 payments to 57 million Social Security recipients to bolster their finances in a year when they are not receiving inflation-pegged, cost-of-living increases because the consumer price index is so low.
In the president's budget, Obama is going to set aside $160 billion for the war in Afghanistan and ongoing operations in Iraq.