United States president Barack Obama has unveiled a US$3.55 trillion spending plan for next year that would boost taxes on the wealthy and curtail Medicare to make way for a US$634 billion down payment on universal health care.

In addition to sending Congress his budget for 2010, Obama on Thursday proposed a series of changes that would push spending to US$3.94 trillion in the current year.

That would result in a record deficit Obama projects will hit US$1.75 trillion, reflecting the massive spending being undertaken to battle a severe recession.

As part of the effort to end the crisis, the administration proposed boosting the deficit by an additional US$250 billion this year, enough to support as much as US$750 billion in increased spending under the government's financial rescue programme.

Obama took a first step toward national health care Thursday in his first budget.

"We must make it a priority to give every single American quality, affordable health care," the president said.

The $3.55 trillion spending blueprint faced close scrutiny for clues on how the new president plans to divide up taxpayer money in the midst of the most severe US economic slide in decades.

It was likely to come under heavy criticism from Republicans, who will object to its tax increases and the bid to dramatically overhaul the country's heath-care system.

"This budget is an honest accounting of where we are and where we intend to go," the president said in a ceremony to present the spending plan.

He was referring to the former Bush administration's exclusion of spending for the wars in Iraq and Afghanistan in its budget accounting.

While already gearing up to pump hundreds of billions of dollars into the economy through emergency spending, Obama also has vowed to slash the nation's $1 trillion-plus debt in half by 2013, the end of his term.

Of particular importance to American partners abroad, the plan contains a proposal to raise hundreds of billions of dollars by auctioning off permits to exceed carbon emissions caps, which Obama wants to impose on users of fossil fuels to address global warming.

Farming operation promises

Obama also promises to phase out direct payments to farming operations with revenues above $500,000 a year.

US farm subsidies have been a point of contention in global trade talks, as critics believe they give American farmers an unfair trade advantage.

On the additional money for bank bailouts, one administration official termed the requested US$750 billion a "placeholder" in advance of a determination by the Treasury Department of what will actually be needed.

The spending blueprint is a 140-page outline, with the complete details scheduled for release in the second half of April, when the new administration sends up the massive budget books that will flesh out the plan.

The budget balances efforts to fulfill Obama's campaign pledges to deliver tax cuts to the middle class, expand health care coverage and combat the economic crisis with an effort to keep an exploding deficit over the next few years from becoming a permanent drag on the economy.

While Republicans assailed the budget for the tax increases, some Democrats worried that Obama was not doing enough to get the deficit under control.

Long-term debt buildup

"I would give him good marks as a beginning, but we have to do a lot more to take on this long-term debt buildup," said Senate budget committee chairman Kent Conrad, a Democrat.

Republicans zeroed in on the tax increases to fund half of Obama's health care expansion.

"Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?" asked House minority leader John Boehner.

The US$634 billion down payment on expanding health care coverage would come from a US$318 billion increase over 10 years in taxes on the wealthy, defined as couples making more than US$250,000 per year and individuals making more than $200,000. The tax increase would occur by reducing the benefit the wealthy get on tax deductions. As one example, taxpayers in the current top tax bracket of 35 per cent would see their tax deduction for every US$1 given to charity drop from 35 cents to 28 cents.

Universal health care drive

The other half of the down payment on Obama's drive toward universal health care - US$318 billion - would come from curtailing payments to hospitals and insurance companies under Medicare, the government health insurance plan for the elderly, and drug payments under Medicaid, which covers people with low incomes.

To meet his pledge of tax cuts for the middle class, the president wants to make permanent the US$400 annual tax cut due to start showing up in workers' paycheques in April as part of the $787 billion stimulus package just passed by Congress.

Obama's budget also extends the middle class tax cuts passed by the Bush administration in 2001 and 2003.

Those cuts were due to expire at the end of 2010. If Congress approves Obama's recommendations, the Bush tax cuts would only expire for couples making more than US$250,000 per year.

The cost of the stimulus bill and the increased bailout support would push the deficit for this year to US$1.75 trillion, a level - as a percentage of the economy - not seen since World War II.

The deficit is expected to remain around US$1 trillion for the next two years before starting to decline to US$533 billion in 2013, according to budget projections.

Obama's plan proposes achieving $634 billion in savings on projected health care spending and diverting those resources to expanding coverage for uninsured Americans. The $634 billion represents a little more than half the money that would be needed to extend health insurance to all the 48 million Americans now uninsured.

Americans now spend a total of US$2.4 trillion a year on health care.

Obama also will ask for an additional $75 billion to cover the costs of wars in Iraq and Afghanistan through September, the end of the current budget year.

That would be on top of the US$40 billion already appropriated by Congress, the administration official said.

The administration will also ask for US$130 billion for Iraq and Afghanistan in 2010.

The $1.75 trillion deficit projected for this year would represent 12.3 per cent of the gross domestic product, double the previous post-war record of six per cent in 1983, when Ronald Reagan was president, and the highest level since the deficit totalled 21.5 per cent of GDP in 1945, at the end of World War II.

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