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Obama budget foresees deficits for a decade

WASHINGTON — President Barack Obama today will propose a 2011 federal budget that would spend $1.3 trillion more than the government takes in — then continue with deficits of more than $700 billion a year for at least a decade. He promised an independent commission would step in later.

His plan would spend $3.8 trillion in the federal fiscal year beginning Oct. 1, a 3 percent increase over the current year. The budget foresees the government taking in $2.6 trillion in taxes and other revenue, an 18 percent jump as the deep recession ends and a growing economy presumably boosts income

The budget also would extend temporary Bush-era tax cuts for those making less than $250,000, now scheduled to expire on Dec. 31, and the Making America Work tax cut enacted last year as a recession fighter.

Tax cuts for those making more than $250,000 would be allowed to expire, however.

Obama's other proposals include tax cuts for small business, including a cut to encourage small businesses to hire new employees and pay existing employees more, and the elimination of the capital gains tax for new investments in small business.

The budget for the 2011 fiscal year, which begins in October, will identify the winners and losers behind Obama's proposal for a three-year freeze of a portion of the budget. Many programs at the National Institutes of Health, the National Science Foundation and the Energy Department are in line for increases, along with the Census Bureau.

Among the losers would be some public works projects of the Army Corps of Engineers, two historic preservation programs and NASA's mission to return to the Moon, which would be ended as the administration seeks to reorient the space program to use private companies for launchings.

Exempted from the cuts, however, are national security, veterans programs, Medicare, Medicaid and Social Security — the most expensive and fastest-growing areas of the budget.

On the spending side, the proposal includes:

$33 billion for the current year and $159 billion next year for the wars in Afghanistan and Pakistan.

$43.6 billion for Homeland Security, a 2 percent increase, including money for 1,000 new Advanced Imaging Technology machines for airport passengers, new explosives detection equipment for baggage and more federal marshals aboard international flights.

a 20 percent increase for the Department of Veterans Affairs.

$100 billion to cities and states for infrastructure work.

$28 billion for the Elementary and Secondary Education Act, a 12 percent increase.

$17 billion increase for Pell grants to college students.

Obama's plan would shave $1.2 trillion off the administration's projected deficits over the next 10 years, aides said, by, among other things:

raising taxes on those making more than $250,000.

slapping a fee on big banks.

ending subsidies for oil, gas and coal production.

cutting or eliminating 120 programs.

Budget officials also predicted the annual deficit as a share of the economy would shrink as the economy rebounded, from 10.6 percent in the current federal fiscal year, to 8.3 percent next year, and to 3.9 percent by the fiscal year starting Oct. 1, 2013.

Peter Orszag, director of the White House Office of Management and Budget, said Sunday evening that Obama wanted to bring the deficit down gradually in relation to the total size of the economy. That would make a "smooth landing" more likely and avoid what he called the mistake of 1937, when, he said, the government moved back toward a balanced budget in the midst of the Great Depression and triggered a recession.

Obama's budget also calls for an independent "Fiscal Commission" that would find ways to further reduce the deficit, with the goal of balancing the budget outside of interest costs by 2015.

Contributing: Jackie Calmes and Robert Pear, New York Times News Service