Debt swells by $13 trillion in Obama plan

WASHINGTON — President Obama proposed a $3.73 trillion budget Monday for fiscal 2012 that he said will start reining in runaway budget deficits, but his plan envisions the gross national debt swelling by almost $13 trillion over a decade.

Obama's budget sets up a clash with the Republican-led House of Representatives over how to recover from the deep recession of recent years and strengthen the economic foundation for the future, with federal spending the pivotal battleground.

Obama would include spending boosts for education, infrastructure and research that he says are critical for recovery, but he'd cut overall federal spending by $90 billion from last year in fiscal 2012, which begins on Oct. 1.

He also said he'd cut this year's record $1.65 trillion deficit to $1.1 trillion next year, but he avoids tough choices on such big issues as Medicare, Medicaid and Social Security, which together are driving the national debt skyward.

His blueprint envisions federal spending jumping by $363 billion in the current year, dropping by $90 billion the next year, then rising again by an average of $218 billion a year for nine years. That would leave the government $26.35 trillion in debt after 10 years — an increase of $10.87 trillion over this year, and $12.82 trillion over last year.

Bottom-line analysts called his budget too timid to address the simmering debt crisis.

"You're treading water when you are about to go over Niagara Falls," said Robert Bixby, the director of the Concord Coalition, a nonpartisan budget watchdog group.

Republicans denounced Obama's budget.

"The president's budget will destroy jobs by spending too much, taxing too much, and borrowing too much," said House Speaker John Boehner, R-Ohio.

"We cannot tax, spend and borrow our way to prosperity," said House Budget Committee Chairman Paul Ryan, R-Wis., adding that Obama's proposal would increase taxes by $1.6 trillion over 10 years.

The House will vote this week on a proposal to cut $61 billion in spending from the current year — $100 billion less than the budget Obama proposed for the current fiscal year, which began on Oct. 1, 2010.

Beyond that, they plan to cut more spending from Obama's proposal for the next fiscal year and beyond. House Republicans will propose details of their budget plan in the next several weeks, although final terms will have to be set in later negotiations with the Democratic-led Senate and Obama.

The coming clash could lead to a grand bargain where both sides negotiate compromises on the country's big fiscal issues — or to a government shutdown if they can't agree.

In a gamble, Obama declined to propose the kinds of major budget changes that his own bipartisan commission said in December were critical to averting a debt crisis, such as raising the retirement age for Social Security.

In a speech Monday in Baltimore, Obama acknowledged that his new budget proposal is only "a down payment" toward needed broader steps down the road.

He said defense spending would drop by 5 percent next year, driven in part by the drawdown of troops from Afghanistan and Iraq.

He also proposed $33 billion in cuts to domestic programs, including $2.5 billion from the program that helps poor people pay heating bills, $1 billion for airports, and nearly $1 billion for water treatment plants.

He'd offset the cuts with increases, however. Among them: $50 billion for roads, bridges and railways, and $4.5 billion for education.

Obama's proposed budget for next year would cut the deficit sharply, but temporarily, to $1.1 trillion from this year's $1.645 trillion.

Most of that improvement would come from a $453 billion jump in taxes, some from a recovering economy, and some from the end of a one-year cut in the Social Security payroll tax paid by all workers. Obama proposes to let it expire so those taxes go back up next Jan. 1.