What did the president propose?
Today's plan calls for spending $3.55 trillion in fiscal 2010 and makes changes to increase the spending this year to $3.9 trillion.
Where does the money come from?
The money comes from federal taxes. The plan would increase a range of taxes. This document follows through on candidate Obama's pledge to allow tax cuts for the rich to expire and to cut taxes for the middle class. Couples earning more than $250,000 would see the top tax rate rise 39.6% by 2011, with the expiration of the tax cuts put in place during the Bush administration. There also would be new limits on tax deductions, including for charitable donations.
Today's proposal would make permanent the tax cuts of up to $800 for couples that were part of the recently passed economic stimulus package.
Other changes include new taxes on offshore drilling and expansions of existing tax credits for college students and the child tax credit.
So will the budget be balanced?
No. It projects a shortfall of about $1.75 trillion this year, about 12% of the gross domestic product, and a $1.1-trillion deficit next year. Those are about twice the size of the worse deficits on record.
What are some of the budget plan's underlying assumptions?
The plan assumes that the gross domestic product, the sum of goods and services produced by the nation, will shrink by 1.2% this year and rebound to about 3.2% by next year. Unemployment will average 8.1% this year and get slightly better next year. Opponents question those assumptions and argue that the poor state of the economy makes it possible that things could get worse.
What does Obama's plan propose to help the banks?
Congress already has authorized more than $700 billion:yikes: to help the financial system, and more had been expected. Today's plan could increase the aid to an additional $750 billion.
What are some of the other big-budget items in the plan?
A major initiative is healthcare. The administration wants to create a $634-billion fund to begin overhauling healthcare and to bring care to the more than 47 million people in the U.S. who are uninsured. Funding would come from new taxes on the rich, new insurance regulations and some tax crackdowns.
What about global warming?
The plan calls for at least $75 billion in revenues by 2012 from a so-called cap-and-trade system that requires companies to buy credits if they exceed greenhouse-gas limits.
What about the wars in Iraq and Afghanistan?
For the first time, costs associated with the war are put into the budget, bringing an annual $140 billion into the document. Including those war costs in the budget does have an advantage: As the wars wind down, so do the projected costs to about $50 billion after 2010, when the bulk of U.S forces are expected to leave Iraq.
What happens next?
The plan moves to Congress, where initial reaction was split.
Republicans are expected to maintain their position, established during the recent stimulus debate, that Obama is calling for too much spending, a bigger federal government and insufficient tax cuts. Democrats will be supportive, but some will question whether the plan goes far enough on healthcare and taxing the rich.