Page last updated at 17:20 GMT, Monday, 1 February 2010

US President Barack Obama unveils 2011 budget plans

President Obama: "It is a budget that reflects the serious challenges"

US President Barack Obama has announced a $3.8tn (£2.4tn) budget plan for 2011, which includes increased spending for job creation, but cuts in other areas.

He also forecast the US deficit would rise to a record $1.56tn this year.

He scrapped plans to send astronauts back to the Moon and will seek to save $250bn by capping a range of domestic spending programmes for three years.

Congress must approve the budget for the financial year starting on 1 October for it to take effect.

Mr Obama blamed the huge deficit on the decisions of President George W Bush, previous Congresses and his administration's moves to prevent an economic collapse.

Kevin Connolly
Kevin Connolly, BBC News, Washington

Barack Obama, buffeted by recent election defeats for his Democratic Party, has a keen political sense of the image he wants to portray on the economy - that of a president forced by circumstance into enlarging America's already huge budget deficit in the short-term while promising in the medium-term to reduce it.

So his $3.8tn budget includes more money for education and scientific research and more for defence programmes. But it also looks forward to eliminating waste and freezing many other domestic programmes.

His critics will accuse him of old-fashioned taxing and spending. His electoral future may well depend on his ability to bring the deficit under control.

He said that in normal circumstances he would have worked to cut the deficit immediately, but expensive steps were need to help the economy.

Mr Obama urged lawmakers to follow his lead on reducing "waste in programmes I care about" and avoid "grandstanding".

He added: "We cannot continue to spend as if deficits do not matter."

The budget includes about $100bn of tax incentives designed to lower double-digit unemployment, including inducements for companies to hire workers.

This will be partially offset by higher taxes on wealthy Americans earning more than $250,000 a year.

The budget also includes more money for education, scientific research and defence programmes.

'Quagmire' of debt

But Mr Obama also plans an overall three-year freeze on the portion of government spending that excludes commitments on welfare benefits, healthcare for the elderly, defence and homeland security.

The president's proposed Nasa budget begins the death march for the future of US human space flight
Republican Senator Richard Shelby

And he cancelled the Constellation programme launched by his predecessor that envisaged putting astronauts on the Moon's surface by 2020.

In his federal budget request, Mr Obama described the project as "over budget, behind schedule, and lacking in innovation", adding that it was draining resources from other Nasa activities.

Under Mr Obama's budget plans, Nasa would get funding to encourage private companies to build, launch and operate their own spacecraft, which could be used to carry astronauts to the International Space Station.

US deficit graphic

Republican Senator Richard Shelby condemned the move. "The president's proposed Nasa budget begins the death march for the future of US human space flight," he said.

Republicans also attacked Mr Obama's proposed tax increases and said the large projected deficits showed he had failed to get government spending under control.

Senator Judd Gregg, the top Republican on the Senate Budget Committee, said the US was sinking into a "quagmire" of debt and that Mr Obama's stimulus plan had failed to create jobs.

"These circumstances call for a bold, game-changing budget that will turn things around, put in place a plan to restrain spending, reduce the debt and tackle the big entitlement programmes that are growing out of control," he said.

"Instead, the president has sent us more of the same."


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Times Online Nasa reduced to 'pipe dreams' as Obama... - 6 hrs ago
Arab News Obama proposes budget with massive deficits - 9 hrs ago
The Independent Era of 'Monopoly money' budgets is over, says Obama - 13 hrs ago
Times Live South Africa US deeper in red - 14 hrs ago
New Scientist NASA nixes moon plan, leaving options wide open - 14 hrs ago

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