On February 1, 2010, US President Barack Obama announced his government's economic priorities for the upcoming fiscal year. In the 2011 Budget Obama revealed that he would need to take the country US $3.8 trillion further into debt in an effort to maintain economic recovery. In making the decision to further increase the nation's deficit, Obama stressed that he did so reluctantly and with purpose, "We simply cannot continue to spend as if deficits don't have consequences; as if waste doesn't matter; as if the hard-earned tax dollars of the American people can be treated like Monopoly money; as if we can ignore this challenge for another generation. We can't." Focusing on fiscal responsibility, the Obama administration proposed to use the funding largely to create jobs and cut taxes in order to strengthen the economy. In his Economic Report to Congress he said, "Until jobs are being created to replace those we've lost -- until America is back at work -- my administration will not rest and this recovery will not be finished." Despite the spending increase, the budget also includes plans to freeze federal discretionary spending for three years in an effort to maintain a balance between stimulating the economy and controlling the deficit. In this vein, Obama called on the US to "...save what we can, spend what we must, and live within our means once again."

With the main focus on jobs and tax cuts, Obama pledged $53 billion in tax cuts and $50 billion job-creating measures including small-business tax cuts and infrastructure programs. Further spending would be committed to Obama's signature health care and energy policies. Conversely, budgets of the departments of Agriculture, Commerce, Justice, Health and Human Services, and Housing and Urban Development are slated to be cut. The plan also calls for an end to the tax cuts implemented by George W. Bush's administration that applied to families making over US $250,000 annually. Under Obama's plan, approximately US $1 trillion in tax increases would be implemented on families with income above US $250,000 over the next decade. The new budget will maintain the tax cuts for the middle class implemented by Bush. These, coupled with the new tax cuts imbedded in Obama's jobs program, stand to cost the government US $284 billion over the coming decade.

Almost immediately after being announced, Obama's budgetary proposals were scrutinized by both Republicans and Democrats. The GOP largely took issue with the raise in taxes and the overall growth in deficit, while Obama's own party opposed some of the tax cuts. House Republican Whip Eric Cantor (R-Va.) summarized some of his party's concerns in a statement on February 1, 2010. He said, "The President's budget spends more than any other in history, creates the largest deficits in history, and imposes the largest tax increases in history -- at a time when our country can least afford it." Paul D. Ryan (R-Wis.), along with five other House members, channeled their opposition of Obama's plan into a bill that would seek to reduce the deficit and spur economic growth by cutting the tax rate on corporations, shifting future Medicare and Medicaid beneficiaries to private insurance plans, and both raising the retirement age gradually to 70 and reducing the growth of benefits to make Social Security solvent. While Obama acknowledged and even praised Ryan for his proposals, he went on to reject it saying, "There is a political vulnerability to doing anything that tinkers with Medicare. And that's probably the biggest savings that are obtained through Paul's plan."

Moving forward with his plans while acknowledging the necessity for proposals from across party lines, Obama outlined that he aimed to work with Congress to establish a bipartisan fiscal commission that would help to balance the budget by 2015, excluding interest payments on the national debt.

Related:

• Experts: Monetary Policy
• Watch Video: Budgeting for a New Era of Responsibility
• Past Feature: The State of the Economy
• From the White House: Fiscal Year 2011 Budget
• In the Spotlight: Testimony: Ben Bernanke on Federal Reserve's Exit Strategy

(Image credit: Flickr user borman818)