A $2.7 trillion deficit

WASHINGTON: President Barack Obama sent his first budget proposal to the US Congress yesterday, bracing himself for fights over how best to heal the economy, create a new health care system and still cut out-of-control deficits.

'This budget is an honest accounting of where we are and where we intend to go,' he said before unveiling a summary that forecasts an eye-popping US$1.75 trillion (S$2.7 trillion) deficit for 2009, followed by US$1.17 trillion in 2010. 'There are some hard choices that lie ahead.'

The soaring US$1.75 trillion deficit is the biggest since World War II.

That and the proposed US$3.55 trillion spending plan for the 2010 fiscal year that begins on Oct 1 sent US Treasury bond prices lower and yields up to three-week highs yesterday.

What was delivered to Congress yesterday was a summary of the President's budget request. The complete document is to follow in April.

The ambitious plan seeks to halve the deficit over the next four years, with higher taxes on richer Americans and a planned drawdown of US troops from Iraq expected to help rein in the shortfall.

Besides tackling a deficit swollen by the US$787 billion stimulus package, the administration is also pushing for progress on the domestic agenda outlined during Mr Obama's presidential campaign. This includes key changes to environmental policies and a major expansion of health coverage.

Mr Obama can take some comfort in knowing that his fellow Democrats in Congress - who control both chambers - are generally supportive.

Even so, experts think that over the next several weeks, he could be in for his first real fight with Congress, with particularly fierce battles waged over the huge deficit and tax policy.

'It won't be smooth sailing,' predicted Ms Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, which wants tough controls to bring down deficit spending.