The Obama Administration proposed a $3.8-trillion 2011 budget Monday, which, if enacted, would put the federal government $1.3 trillion further into debt next fiscal year, according to White House estimates. For this fiscal year, which started in October, the administration is projecting a record-setting $1.6-trillion deficit.
President Obama is asking Congress to allow the 2001 and 2003 tax cuts to expire next year for families making more than $250,000 a year, remove tax credits for oil, gas and coal companies and levy new fees on banks. Combined with a targeted three-year spending freeze, the White House said these steps will save $1.2 trillion over ten years.
Peter Orszag, the director of the Office of Management and Budget and the White House's top budget official, said the agencies targeted for a spending freeze "have stepped forward with a sensible approach to achieve this overall cap," and the administration will reveal those details later Monday morning.
The 2011 budget also calls for "more than 120 terminations, reductions, and savings for more than $20 billion of savings," according to the White House. In order for the federal government to realize those savings, Congress would have to sign off on them.
"We don't expect this is going to be easy," said White House Communications Director Dan Pfeiffer, who added that the White House proposed some of these cuts last year and Congress continued to fund these programs anyway. However, Pfeiffer expressed confidence in Congress to follow through on some of these cuts and claimed lawmakers eliminated 60 percent of the cuts the administration requested last year.
The budget also features about $100 billion in tax cuts, like an extension of a provision through 2010 that allows small businesses to immediately expense up to $250,000 of qualified investments, an increase in the child tax credit and the elimination of a tax on capital gains for new investments in small businesses. The middle-class Making Work Pay tax credit of $400 an individual and $800 per couple were set to expire this year. The administration has proposed a one-year extension.
The White House is calling for an increase in the research and development credit by more than 6%, to more than $60 billion, $100 billion in aid to state and local governments for construction projects, and the creation of a $4-billion National Infrastructure Innovation & Finance Fund to "focus on infrastructure investments of national and regional significance," according to the administration.
The White House said it expects the federal budget deficit to surpass at least five percent of Gross Domestic Product through until 2013, when it forecasts a 4.2 percent mark. The administration forecasts a jump to 10.6 percent this year and 8.3 percent next year.
The 2011 fiscal year begins on October 1, 2010 and ends on September 30, 2011.