President Obama will offer a plan this week to cut the federal deficit in half by the end of his first term in office, largely by winding down the war in Iraq and raising taxes on people making more than $250,000 a year, an administration official said Saturday.

His federal budget blueprint also proposes to help reduce the deficit by eliminating waste and inefficiency in government, even as the administration launches ambitious and costly policy initiatives such as increasing access to healthcare and reducing greenhouse gas emissions.

Obama’s first budget proposes cutting the $1.3-trillion deficit he inherited when he took office to $533 billion by the end of his first term, bringing it to about 3% of the economy, said the official, who asked not to be named because the budget hasn’t been released.

As he begins to sell his plan for reaching that goal, the president will meet with a select group of lawmakers and experts Monday in a summit that the White House says will focus on bringing fiscal responsibility to the process of government. Obama will speak directly to Congress on Tuesday about the state of the country, building toward a presentation of his budget blueprint on Thursday.


Obama’s emphasis on fiscal responsibility is a key component of his attempt to sell the budget politically, a hedge against critics as the White House contemplates massive government bailouts of banks and automakers and moves to implement a rescue plan for homeowners.

Republican members of Congress have characterized Obama’s stimulus plan as reckless spending, and the administration’s intent to raise taxes on higher-income people in the next budget year is likely to draw an outcry.

Even as he talks about the need to stop the collapse of key economic sectors, Obama has repeatedly preached that the recipients of rescue money must act with restraint and responsibility.

On Saturday, the president insisted in his weekly radio and Web address that the government would get its own house in order too. “We can’t generate sustained growth without getting our deficits under control,” Obama said.


His budget is “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,” he said.

President Bush inherited a budget surplus from President Clinton, but the deficit soared during the Bush administration. In the final months of Bush’s presidency, the federal government’s bailout of the financial markets pushed the deficit to more than $1 trillion. Since Obama took office, Congress has signed off on a $787-billion economic stimulus plan.

Yet as Obama tackles the problems that were awaiting him upon arrival in the Oval Office, he is also preparing to turn toward a list of domestic policy items he promised during the campaign.

With the unveiling of his budget, Obama will attempt to direct attention toward some of those initiatives, most notably his plan to overhaul the healthcare system.


The White House had been gearing up to make it the first policy initiative on its docket. But plans were waylaid when former Senate Majority Leader Tom Daschle, Obama’s choice to serve as point man on the project, withdrew from consideration for the job after it was discovered that he hadn’t paid income taxes on a car and driver and other compensation he received after he left the Senate in 2005.

The budget plan may cut spending on some health programs, potentially freeing up money to increase access to care.

Aides also say the president plans to begin addressing climate change and energy independence, two other resonant themes of his candidacy, with plans to limit the emission of greenhouse gases and reliance on foreign oil.

A key cost-saving measure of the president’s plan -- withdrawal of combat troops from Iraq -- would also be the fulfillment of a campaign pledge.


The wars in Iraq and Afghanistan have added an estimated $135.6 billion in costs above the Pentagon’s $512-billion budget during the present year, according to Pentagon figures.

Withdrawing troops from Iraq would result in a net savings, even though the president is sending more troops to Afghanistan.

Historically, the war in Iraq has cost more than the war in Afghanistan, and the presence of American forces in Iraq has been much larger. Even after the U.S. doubles its presence in Afghanistan, it will still be less than half the size of the force now in Iraq.

The president hasn’t outlined yet what kind of force, if any, he wants to keep in Iraq and what that might cost. The budget plan may bring that into sharper relief.


The White House is also anticipating savings from the lapse of Bush’s temporary tax cuts in 2011, which apply to people who make more than $250,000 a year. Obama called for the repeal of those tax cuts when he was running for office.

Also under consideration is the idea of taxing the investment income of hedge fund managers as income rather than as capital gains, potentially increasing the rate from about 15% to about 35%.

In addition, administration officials say the president will take steps to make government work more efficiently and eliminate programs that don’t work, though another appointment misstep has slowed that initiative: Nancy Killefer, chosen to head up efforts to eliminate inefficient programs, withdrew from consideration because of personal tax issues.

There will also be an “honest budgeting” component to the budget address, critical of “accounting sleight of hand” that the administration source says has been part of the budget process in the past.


“We should not tolerate these kinds of tricks when it comes to accounting for the public’s tax dollars,” White House spokeswoman Jen Psaki said.

Though Obama’s budget overview for the fiscal year beginning in October will come Thursday, the full spending plan isn’t due until April. Still, the sales pitch began over the weekend, with Obama promising in his radio address to get “exploding deficits under control.”

Bringing down the deficit is important for the long-term health of the economy, he said: “We can’t generate sustained growth without getting our deficits under control.”

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cparsons@tribune.com