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Obama spending plan highlights political divide

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WASHINGTON (AP) — President Barack Obama sent Congress a $3.73 trillion budget proposal that highlights the partisan divide bound to shape next year’s presidential race.

Obama administration officials say the 2012 spending plan submitted Monday would cut the soaring U.S. deficit over the long haul, while investing in America’s future with spending on clean energy, education and high speed rail.

Republicans, who took control of the House of Representatives last month in part because of voter anger over soaring deficits, said Obama’s plan would do little to cut the government’s debt.

“He’s making it worse, not better,” said Paul Ryan, the Republican chairman of the House Budget Committee.

Obama, who is expected to seek re-election next year, largely ignored the politically painful recommendations of his own deficit commission. That panel had warned that the United States is imperiled without significant cuts to huge entitlement programs, including health and pension plans for the elderly.

Still, Obama called his new budget one of “tough choices and sacrifices.” He proposed trimming the deficits by $1.1 trillion over a decade. The administration is projecting that the deficit will hit an all-time high of $1.65 trillion this year and then drop sharply to $1.1 trillion in 2012, with an expected improvement in the economy and as reductions in some taxes expire.

Jacob Lew, the president’s budget director, told reporters that the president’s budget was a “meaningful down payment” in attacking the deficits that would get the country’s finances headed in the right direction.

But even some Democrats complained that Obama needed a more vigorous attack on future budget deficits.

“We need a much more robust package of deficit and debt reduction over the medium- and long-term,” said Senate Budget Committee Chairman Kent Conrad, a Democrat, who called for a budget presentation matching the ambition of Obama’s deficit commission.

The $14 trillion national debt — the cumulative total of deficits — would grow to $16.7 trillion by Sept. 30, 2012, Obama’s budget projects. Much of that debt is owed to China.

The budget plan would trim spending at the State Department, while maintaining significant funds for programs in Afghanistan and Pakistan as well as Iraq, where U.S. diplomats will face serious challenges as American troops continue to withdraw.

The budget retains major assistance programs for U.S. allies in the Middle East, including $1.5 billion for Egypt despite the recent ouster of President Hosni Mubarak. Officials stressed, however, that money for Egypt, including $1.3 billion in military aid, could be altered depending on developments.

Israel is slated for $5.6 billion, including $3.1 billion in military aid.

The proposed budget foresees reductions for development funds in Africa and Latin America. It would eliminate direct military assistance totaling $5 million for five countries — Chile, Haiti, Malta, East Timor and Tonga. It also would reduce economic assistance for east European and Central Asian countries.

The projected $1.65 trillion deficit for the current year would be the highest dollar amount ever, surpassing the $1.41 trillion deficit hit in 2009. It would also represent 10.8 percent of the total economy, the highest level since the deficit stood at 21.5 percent of gross domestic product in 1945, reflecting heavy borrowing to fight World War II.

The president’s 2012 budget projects that the deficits will total $7.21 trillion over the next decade with the imbalances never falling below $607 billion. Even then, that would exceed the deficit record before Obama took office of $458.6 billion in 2008, President George W. Bush’s last year in office.

The surge in deficits reflect the deep 2007-2009 recession, the worst since the Great Depression, which cut into government tax revenues as millions were thrown out of work and prompted massive government spending to jump-start economic growth and stabilize the banking system.

Republicans point to still-elevated unemployment levels and charge the stimulus programs were a failure. The administration contends the spending was needed to keep the country from falling into an even deeper slump.