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Obama Budget Boosts Spending On Jobs, Education

President Obama on Monday released a budget for fiscal 2011 that calls for record spending of $3.8 trillion. Blaming the situation on what he called a "decade of profligacy," the president also announced a three-year freeze on discretionary spending and other measures aimed at reducing red ink in the years to come.

The budget includes $100 billion earmarked for job creation as the nation emerges from the worst recession in decades, but it would allow tax cuts for Americans earning more than $250,000 a year to expire — a provision sure to raise the ire of congressional Republicans.

"We won't be able to bring down this deficit overnight," Obama said. "We have to continue to do what we can to create jobs."

Speaking at the White House, Obama laid much of the blame for the huge deficits at President Bush's feet, saying the budget his predecessor left behind contained a $1.3 trillion shortfall and the rescue of the financial services industry "was not without significant costs." He blamed tax cuts for the wealthy ushered in by the previous administration and the "funding of two wars without paying for any of it" as prime reasons the nation's debt had ballooned over the last decade.

Later, Budget Director Peter Orszag said the effects of the economic downturn had exacerbated the budget situation, amounting to about $2.5 trillion over the next decade "because when the economy weakens, tax revenue declines and certain types of spending automatically increase."

Among the president's proposals was a tax on big banks that he said was appropriate to help repay taxpayers for bailing them out at the height of the crisis.

But the president was careful to emphasize his efforts to turn things around in the next few years. Starting next year, the president wants to slowly begin whittling away at the deficit, cutting more than 120 government programs and freezing discretionary spending that's not tied to national defense.

In normal circumstances, he said he would have worked to pay down the yearly deficit immediately, but costly steps were needed to help an economy in free fall. He called on lawmakers to forgo "grandstanding" and take the lead on putting the nation's fiscal house in order.

And he asked them to create a bipartisan task force to propose further reductions that would eliminate budget deficits by 2015. The U.S. Senate turned down a similar proposal last week.

The proposed spending freeze would take effect in 2011. It would exempt Medicare, Social Security and national security.

In the spirit of bipartisanship, Obama said he was willing to sacrifice programs he cared about, citing a federal initiative to clean up environmentally unsafe buildings. He said money from private sources would have to do.

"We've already found $20 billion" in spending cuts this year, he said. "I'm asking Democrats and Republicans alike to see what's working and what's not and to take appropriate action."

But the president also proposed a 6 percent increase in education funding, saying it was needed to tackle unemployment and make America more competitive.

"There is no better anti-poverty program than a world-class education," he said. "By 2020, we will once again have the highest proportion of college graduates in the world."

Republicans were critical of the president's budget plan, saying it fell short of what's needed to erase the deficit.

Sen. Judd Gregg (R-NH), the ranking member of the Senate Budget Committee, called the proposed freeze "a baby step."

"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 programs that are growing out of control," he said. "Instead, the president has sent us more of the same."

Peter Morici, an University of Maryland economist, said the budget said is based on a best-case scenario.

"The document assumes that real GDP grows at better than 4 percent a year over the four years from 2011 to 2014, and the economy does not encounter a serious recession," he told NPR.

Some Democratic lawmakers defended the increased spending as necessary in weak economic times.

"You're not going to bring down the deficit, you're not going to eliminate these problems without growing the economy," Rep. James Clyburn (D-SC), told Fox News. "You're not going to grow the economy by wishing it. You're going to have to invest in it."

NPR's Scott Horsley, Andrea Seabrook and John Ydstie contributed to this story, which also includes material from wire reports

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