Obama unveils budget plan

President Obama on Thursday unveiled a $3.55-trillion budget outline that he described as an “honest accounting” of federal spending and of the efforts needed to turn the economy around -- but one that also revealed the political battles ahead.

After weeks of appealing for bipartisanship, Obama said that only bold, immediate action would set the United States on the path to long-term prosperity.

“The time has come to usher in a new era -- a new era of responsibility in which we act not only to save and create new jobs, but also to lay a new foundation of growth upon which we can renew the promise of America,” the president wrote in the preface. “This budget is a first step in that journey.”

The document -- which included broad goals and few line items -- laid down controversial markers on almost every major issue facing the country. Among the immediate budget winners are the middle class and the poor, whose taxes will be eased. Among the losers are the wealthy, whose taxes will increase, along with those of drug companies and oil and gas companies.

The fiscal 2010 budget projects a $1.17-trillion deficit, following an estimated $1.75-trillion deficit for 2009 -- a shortfall Obama described as unfortunate but necessary in the short term to jump-start the economy.

“We inherited these twin trillion-dollar deficits,” Budget Director Peter R. Orszag said, noting that two stimulus packages aimed at the ongoing economic crisis were big contributors to the flood of red ink.

Obama said the deficit numbers also were eye-popping because the previous administration left spending for the wars in Iraq and Afghanistan off the books.

“We need to be honest with ourselves about what costs are being racked up, because that’s how we’ll come to grips with the hard choices that lie ahead,” Obama said.

It is a theme the administration has been building on for weeks as it has tried to line up congressional support for what will be record levels of spending for the next several years. Obama has pledged to bring down the deficit spending as quickly as possible, and his budget projection shows him meeting a self-imposed target: halving the deficit to $570 billion in fiscal 2014.

“Unfortunately, President Obama has inherited a colossal mess,” said Senate Budget Committee Chairman Kent Conrad (D-N.D.). This budget, he said, “takes steps to respond to these challenges. Yet, as the president himself has indicated, much more will be needed to put our budget back on a sound long-term fiscal course.”

One Democratic budget expert, however, said she saw nothing in Obama’s plan to bring down the deficit over the long run.

“There’s a lot of rhetoric about it, but no plan,” said Isabel Sawhill, a former associate director of the Office of Management and Budget in the Clinton administration. “Right now, they’re singing the right song about fiscal responsibility, but they don’t have a plan to get there.”

And Republicans on Thursday accused Obama of adopting hackneyed approaches to the federal budget.

“Regrettably, the reality of the president’s budget falls far short of his inspiring words,” said Rep. Paul D. Ryan (R-Wis.), the top Republican on the House Budget Committee. “It is simply a continuation of the misguided notion that America can spend, tax and borrow its way to prosperity.”

Mindful of such criticism, the president is seeking to launch some of his signature initiatives -- such as a cap-and-trade program to combat global warming -- by paying for them with new revenues.

His budget outline also would plow more money into aiding college students, as well as reshaping the electric power transmission grid to make greater use of wind power and other renewable energy sources -- investments Obama said would yield important dividends in the future.

The budget plan also would reduce payroll taxes by $800 for families with incomes under $150,000. But those with incomes above $250,000 would see their tax burden go up, mostly through changes in how deductions are itemized.

Obama’s budget also demands concessions from influential sectors of the healthcare industry, with proposals that could cost drug makers, hospitals and insurers billions of dollars.

More than quarter of a $634-billion reserve fund the president wants to create to help finance his healthcare agenda would come from insurance companies that could see smaller premiums from the federal government for providing Medicare services to senior citizens.

The Defense Department -- typically a big winner in recent years -- comes out about even in Obama’s budget proposal.

Republicans expressed dismay at the size of the budget commitments, even as they acknowledged that they bear some blame for the problems Obama is trying to fix.

“There has been too much spending under Republicans over the last couple years,” said House Minority Leader John A. Boehner (R-Ohio). “But if you begin to look at what happened over the last month, and what’s being proposed in this budget, this president’s beginning to make President Bush look like a piker.”

Boehner insisted that Republicans would not just be naysayers.

“Republicans will not be the party of ‘no,’ and we will continue to work with the president when we can,” Boehner said. “Where we must oppose him, I think it’s our obligation to be the party of better solutions, and we will have alternatives out there in those areas where we do disagree.”

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maura.reynolds@latimes.com

peter.nicholas@latimes.com

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Jim Puzzanghera, Jim Tankersley, Noam N. Levey, Julian E. Barnes, Mike Dorning, Frank James and Ben Meyerson in our Washington bureau contributed to this report.

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