President Obama has released his fiscal budget for 2012, which projects a $1.65 trillion deficit in the current fiscal year. That figure represents the largest dollar amount in U.S. history and the largest deficit as share of the economy (10.9 percent of gross domestic product) since World War II. Remember the GOP's insistence on extending the Bush-era tax cuts for the rich in December? Well, it's time to pay up. To bring down the federal deficit over ten years, the president is proposing $3.73 trillion in spending in 2012, as "part of a plan that includes budget cuts and tax increases," reports The Wall Street Journal. Two thirds of the savings will come from spending cuts and one third from tax increases. After this year, the budget projects that deficit will decline to “sustainable” levels for the rest of the decade, says the New York Times.
Still, annual deficits through fiscal year 2021 will add a combined $7.2 trillion to the federal debt, Mr. Obama’s budget shows - after allowing for $1.1 trillion in deficit-reducing spending cuts and tax increases that the president proposes over the 10-year period. As he acknowledges, after 2021, an aging population and rising medical costs will drive deficits again to unsustainable heights.
The budget proposes slashing spending in domestic programs in order to free up investments in education, clean energy, innovation, and research. But don't fret over cuts to things like Pell grants and home-heating aid for poor families just yet. It's likely to look very different after the Republicans get their hands on it.