Obama puts squeeze on the rich

The President forecasts the government spending a record 1.66 trillion dollars more than it takes in through taxes and he urged politicians to follow his lead on reducing waste and to avoid "grandstanding".

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

He said in normal circumstances he would have worked to pay down the yearly deficit immediately, but costly steps were need to help an economy in free fall.

The budget proposal also reflects pressure on Mr Obama ahead of the November congressional elections to cut unprecedented growth in the US debt.

Mr Obama and the Democrats are trying to regain their political footing after the upset of losing of a Massachusetts Senate seat long held by the late Senator Edward Kennedy. That vote cost them their

supermajority in Congress and appears to have stalled efforts to pass healthcare reform legislation.

In the meantime Mr Obama pledged in his State of the Union address last week to make job creation his top priority.

After a protracted battle on healthcare dominated his first year in office and led to a string of Democratic election defeats, the administration hopes its new budget will convince Americans he is focused on fixing the economy.

The 3.83 trillion dollar budget includes a huge tranche to lower double-digit unemployment – about 100 billion dollars in tax incentives to hire workers and improve the nation's infrastructure and energy sector.

The spending jump will be partially offset by higher taxes on wealthy Americans – families earning more than $250,000 (157,000) yearly – through plans to let expire tax cuts put in place during the Bush administration .

Mr Obama also seeks an overall freeze on the portion of government spending excluding commitments for Social Security and healthcare for the elderly as well as defence and homeland security.

As written, the spending plan's 1.56 trillion dollars in red ink surpasses last year's then-record 1.41 trillion dollar gap. It reflects a continuing flood of government spending designed to ease the worst economic downturn since the 1930s Great Depression.

Republicans complained about Mr Obama's proposed tax increases and said the huge projected deficits showed he had failed to get government spending under control. But administration officials argued that Mr Obama inherited a deficit already topping a trillion dollars when he took office.

Given the severity of the downturn, they say, the President had to spend billions more to stabilise the financial system while trying to pull the economy out of recession.

Mr Obama's job proposals would push government spending in the current fiscal year ending at the close of September to 3.72 trillion dollars, up 5.7 per cent from last year.