27 Feb 2009

Obama unveils $3.55 trillion budget

3:08 pm on 27 February 2009

United States president Barack Obama unveiled a $US3.55 trillion budget on Thursday that outlines aggressive plans to boost the recession-stricken American economy and overhaul its health care system.

President Obama forecast the biggest US deficit since World War II in the budget, that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall.

In the current fiscal year the new budget projects a deficit of $US1.750 trillion, or 12.3% of gross domestic product. This would fall to $US1.171 trillion in the 2010 financial year.

Mr Obama promised to get the red ink under control, but showed no sign the staggering deficits would deter him from veering sharply away from the policies of his Republican predecessor President George Bush.

Although tax cuts and social-service spending are a main part of his remedies for lifting the faltering economy, the budget also pencils in $US250 billion to help stem the turmoil in the banking sector. Mr Obama has not decided whether to seek that money.

The Republican opposition in Congress was quick to condemn a budget plan that underlines Mr Obama's intention to make good on campaign pledges to expand health coverage for the uninsured and roll back tax cuts for the wealthy.

Republican representatives condemned the plan as showing a dedication to "tax-and-spend" policies, presaging major political fights getting the budget passed

The spending would mark a decline from the $US3.938 trillion projected for the current fiscal year, which ends 30 September.

It would include about $US200 billion to fight wars in Iraq and Afghanistan over the next 18 months, and a huge $US634 billion 10-year fund to pay for health care reforms, a key plank of Mr Obama's election campaign.

Overall, the president is seeking $US663.7 billion in defence spending for fiscal 2010 that includes the costs of wars in Iraq and Afghanistan, an increase of roughly 1.5%.