President Barack Obama is to unveil plans this week to slash the federal budget deficit by half, after signing a massive spending program aimed at reviving the US economy, an administration official said.
The president is expected to roll out his budget proposals over the coming days, beginning with a "fiscal responsibility summit" of officials and experts on Monday, his first address to Congress on Tuesday and the unveiling of his 2010 budget on Thursday.
When he took office in January, Obama inherited a US economy in deep crisis, laden with an annual budget deficit of more than a trillion dollars that is to swell even more with the 787 billion dollar stimulus package Obama signed into law last week.
But the administration hopes that the weighty deficit can be reduced by a combination of war spending cuts in Iraq and tax hikes on the wealthy.
After Obama on Saturday hailed the start of that he said would boost the paychecks of 95 percent of Americans, a senior administration official said the next fiscal step would aim to slash spending in Iraq and raise taxes on the "wealthiest Americans."
The official did not specify how much money a person must make to be categorized as the "wealthiest." But during the election campaign, Obama included into this group people making more than 250,000 dollars a year.
The official said that the goal is to halve the federal deficit by the end of Obama's first term in 2012.
According to The New York Times, the president is proposing to tax the investment income of hedge fund and private equity partners at ordinary income tax rates instead of the capital gains rate, which does not exceed 15 percent.
Income tax rates are currently as high as 35 percent and could return to 39.6 percent under the plans.
Obama's campaign had forecast a saving of some 90 billion dollars a year by withdrawing combat troops from Iraq. But the real potential for savings on military spending remains unclear, with the administration ordering a boost of 17,000 troops to Afghanistan.
Obama said Work on the deficit would begin on Monday, when he convenes the fiscal summit of independent experts, unions, advocacy groups and members of Congress to discuss how the trillion-dollar deficit can be cut.
Obama is to lay out his program of governance to a joint session of Congress Tuesday. The administration is expected to deliver its budget for the 2010 fiscal year to Congress Thursday, with a multi-year version expected in April.
With many seeing further budget stimulus packages as necessary, Obama will have to appeal to fiscal conservatives, wary that the government is placing too much debt on future generations.
Obama's Republican rivals are also likely to mount fierce opposition to any tax hikes, after blasting the mammoth spending plan as mortgaging the nation's future.
Even before the spending commitments in Obama's new package, the Congressional Budget Office said the provisional US budget deficit in fiscal 2009 would balloon to a record 1.2 trillion dollars.
The deficit for the fiscal year 2008, which ended in September, reached 438 billion dollars, or 3.1 percent of the nation's gross domestic product, the office said in a report last month.
In his weekly radio and internet address on Saturday, Obama said he and his administration were determined to do "all we can to get exploding deficits under control as our economy begins to recover."
Showcasing his recovery plan, Obama said that because of his new spending plan, "three and a half million Americans will now go to work doing the work that America needs done."
Starting this Saturday, he said, employers had begun reducing taxes for 95 percent of working American families as mandated by the stimulus package.
By April, the average American family would begin to keep an additional 65 dollars each month, he added.
Roughly one-third of the stimulus funds, 286 billion dollars, are to be spent on tax cuts in a bid to boost consumer spending, a key engine of the world's largest economy.
Another 120 billion dollars has been allocated to infrastructure projects in transportation, road-building and work improving the power grid and renewable energy installations.
But the president acknowledged that signing the stimulus plan into law was only a first step.
A complete recovery would require stemming the spread of real estate foreclosures and falling home values; stabilizing and repairing the banking system in order to restore the flow of credit to families and businesses; and reforming the broken regulatory system that made the crisis possible, he said.