President Barack Obama on Monday proposed halving the U.S. deficit by 2013 and cutting $1.1 trillion over the next decade in a budget he called a downpayment on fiscal control.

But Republicans, who accuse Obama of being a tax-and-spend Democrat, said the president had not gone far enough in controlling costs. They aim to make the 2012 presidential election a referendum on his fiscal track record.

Obama said his plan was a balance between deficit reduction pain and investment for growth. It only provided a general guide on how to tackle entitlement outlays that include the Social Security and Medicare programs responsible for huge government spending.

What we have done here is make a downpayment, but there is going to be more work that needs to be done and it's going to require Democrats and Republicans coming together to make it happen, he said at a school in nearby Maryland.

Obama's $3.729 trillion budget proposal for fiscal 2012 shows the deficit rising to a record $1.645 trillion in fiscal 2011, then falling sharply to $1.101 trillion in 2012.

This trend would trim the deficit as a share of the U.S. economy to 3.2 percent by 2015 from 10.9 percent this year, and meet a pledge Obama made to his Group of 20 partners to halve the deficit by 2013. The news was well-timed, with G20 finance ministers meeting in Paris on Friday and Saturday.

Two thirds of the savings come from spending cuts and the rest through higher revenues as U.S. growth steadily picks up pace, and from tax increases. The president seeks $129 billion over 10 years by cutting big business tax breaks. laying out the president's policy priorities.


Obama's budget for fiscal 2012 is a proposal to Congress and months of wrangling will now follow with Republicans, who control the House of Representatives and increased their seats in the Senate after November elections. They campaigned on deep cuts in federal spending.

Congress often goes in a different direction, said Michael Moran, chief economist at Daiwa Securities America in New York, who was also disappointed there was not more from the president on tackling entitlements.

Instead, Obama merely said he would work with Congress to overhaul the corporate tax code, and laid out broad principles for reforming Social Security that reflect long-held Democratic commitments to defend pensions for the elderly and disabled.

Senate and House budget committees must craft their own budget blueprints. If they succeed, this yields so-called resolutions providing guidance for other congressional committees to write legislation via a number of separate funding bills that can be voted into law.

Success in not assured. Obama's 2011 budget became mired in bipartisan politics when Democrats and Republicans could not agree, forcing lawmakers to resort to a stop-gap legal measure to keep funding the government which expires on March 4.

Failure to agree to a new funding bill could result in the government shutting down. That would replay a 1995-1996 showdown between a Democratic president and a Republican-led House of Representatives. The public sided with President Bill Clinton, who won re-election.

I think what we do have agreement on is that it would not be prudent to shut the government down and we look forward to working through these differences once things settle down a little bit more, said White House Budget Director Jack Lew.

Republicans, who have already unveiled much tougher proposals to rein in rising U.S. debt, were not impressed.

The president's budget isn't winning the future, it's spending the future, said House Speaker John Boehner, in a play on one of the White House's favorite slogans.

U.S. debt will be hit a legal limit of $14.3 trillion by the end of may unless lawmakers act to lift that ceiling.

We want to see what happens with a negotiation with the Republicans, said Greg Anderson, G10 strategist at CitiFX in New York. Are we going to get another situation as last December with Obama spending increases and Republican tax breaks or actually get...greater fiscal responsibility?


The budget shows the deficit steadying around 3 percent of gross domestic product from 2015 onward, slowing the rate at which the U.S. adds to its debt, although it will still climb to 77 percent of GDP by 2021, up from 72 percent in 2011.

Obama plans to freeze non-security discretionary spending for five years, lowering the deficit by $400 billion over 10 years and saving $33 billion in fiscal 2012, which starts on October 1, 2011.

Healthcare savings over 10 years will spare $62 billion to finance a traditional yearly Doc-fix to reimburse physicians to ensure they keep seeing Medicare patients.

Defense spending in the budget will be cut by $78 billion over five years, as previously announced, and will be 5 percent lower in 2012 compared with the level sought in 2011.

(Additional reporting by Patricia Zengerle, Caren Bohan, Ross Colvin, Matt Spetalnick, David Morgan, Roberta Rampton, Glenn Sommerville, Melissa Bland and Emily Kaiser, Editing by Sandra Maler)