Despite Stimulus, Obama Aims to Slash Deficit

In his Saturday radio and Internet video statement, Barack Obama said:

And it will require doing all we can to get exploding deficits under control as our economy begins to recover. That work begins on Monday, when I will convene a fiscal summit of independent experts and unions, advocacy groups and members of Congress, to discuss how we can cut the trillion-dollar deficit that we've inherited. On Tuesday, I will speak to the nation about our urgent national priorities. And on Thursday, I'll release a budget that's sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline.

No single piece of this broad economic recovery can, by itself, meet the demands that have been placed on us. We can't help people find work or pay their bills unless we unlock credit for families and businesses. We can't solve our housing crisis unless we help people find work so that they can make payments on their homes. We can't produce shared prosperity without firm rules of the road, and we can't generate sustained growth without getting our deficits under control. In short, we cannot successfully address any of our problems without addressing them all. And that is exactly what the strategy we are pursuing is designed to do.

Barack Obama inherited an estimated $1.3 trillion deficit from George Bush. He hopes to cut this deficit to $533 billion by 2013.

Another anticipated proposal would be increasing the taxes on the investment income of hedge fund and private equity partners, currently taxed at the capital gains rate of 15%. They would shift that tax rate to ordinary income tax rates, which are now as high as 35% and could return to 39.6%.

In terms of tax raises, Obama will do this simply by letting the Bush tax cuts on those making more than $250,000 expire in 2011.

Additionally, during the 2008 campaign Obama's staff projected that withdrawing combat troops from Iraq would save about $90 billion a year. It is unclear how additional troops in Afghanistan will affect the budget.

But Obama will not use the "tricks" used by George W. Bush to keep his budget appearing "modest," according to the New York Times.

For example, Obama will include war costs in the budget; Bush instead asked for supplemental money from Congress each year. This will make his budget both more realistic (and honest), and larger.