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Monday
Feb142011

Obama Proposes Budget Plan to Reduce Deficit by $1.1 Trillion

Photo Courtesy - Chip Somodevilla/ Getty Images(WASHINGTON) -- President Obama on Monday proposed a 10-year budget plan that would increase the national debt by $7.2 trillion -- $1.1 trillion less than if it wasn't implemented.

The plan shows that President Obama will not take the lead on any aggressive and serious measure to reduce the annual budget deficit and eliminate the $14 trillion debt.  This sets up the Obama administration on a collision course with Republicans, who are calling for serious deficit reduction and spending cuts.  On Friday night, House Republicans unveiled a spending bill to fund the government for the next seven months that they say will reduce the president’s requested spending levels this year by at least $100 billion.

The Obama administration says two-thirds of its proposed $1.1 trillion in deficit reduction would come from spending cuts, and one third from tax increases.

The president's proposal would take in $2.627 trillion and spend $3.729 trillion. The 2012 budget deficit would be $1.101 trillion, less than this year’s projected $1.645 trillion deficit.

Among the tax increases proposed are ending subsidies for oil and gas companies, and reducing the rate at which those in the highest tax bracket and some people in the second highest bracket can itemize tax deductions in areas such as interest on home mortgages and charitable giving.

The Obama administration is also proposing letting expire after 2012 the lower Bush tax rates on income over $200,000 for an individual and $250,000 for a family, but they are not including this revenue when projecting the $1.1 trillion in deficit reduction.

Some of the spending freezes/cuts include:

-- A five-year spending freeze over non-security-related discretionary spending ($400 billion/10 years).

-- Cutting $300 million in Community Block Grants.

-- Cutting LIHEAP in half, or by $2.5 billion.

-- Cutting $125 million from the Great Lakes Restoration Initiative.

-- Cutting more than $1 billion in grants to large airports.

-- Cutting $950 million in states’ funds for water treatment plants and other infrastructure.

-- Having the Pentagon budget grow at just the rate of inflation, which would cut $78 billion.

At no point in the president’s 10-year projection would the U.S. government spend less than it's taking in.  Administration officials say that by 2017 the projected deficit -- $627 billion -- would consist entirely of the interest on the current debt.

Copyright 2011 ABC News Radio

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