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U.S. President Barack Obama is projecting the deficit will hit an all-time high of $1.65 trillion US in 2011. ((Associated Press))

U.S. President Barack Obama is sending Congress a $3.73 trillion US spending blueprint that pledges $1.1 trillion in deficit savings over the next decade through spending cuts and tax increases.

Calling the budget one of "tough choices and sacrifices," Obama said most of the largest cuts would be held off until after the end of his first term.

"While we are committed to finding further savings, we can't sacrifice our future in the process," the U.S. president said. 

Obama is projecting the deficit will hit an all-time high of $1.65 trillion this year and then drop sharply to $1.1 trillion in 2012, with an expected improvement in the economy and as reductions in Social Security withholding and business taxes disappear.

Two-thirds of Obama's projected savings will come through spending cuts that include a five-year freeze on many domestic programs.

The other one-third of the savings would come from tax increases, including limits on tax deductions for high-income taxpayers.

Education key

The president spoke at Parkville Middle School near Baltimore, an institution that focuses on science, technology, engineering and math. Although he pitched the budget as being part of a wave of austerity that's flowing over governments around the world, he said the country has a responsibility to commit money to areas that will help it compete against other nations. And he emphasized education as one example.

America needs to invest in education, because it will be key to the country's long-term recovery, he said.

The U.S. president's speech did not succumb to pressure to make major changes to Social Security, Medicare or Medicaid, which combined account for more than one-third of federal spending.

The plan also resurrects a series of tax increases that Republicans, who now control the House, were not receptive to when Obama floated them last year, including tax increases for oil, gas and coal producers, investment managers and U.S.-based multinational corporations.

The plan would allow Bush-era tax cuts to expire at the end of 2012 for individuals making more than $200,000 and married couples making more than $250,000. Wealthy taxpayers would have their itemized deductions limited, including mortgage interest, charitable contributions and state and local taxes.

Obama's proposal would extend tax credits for college expenses and childcare, as well as a more generous Earned Income Tax Credit for the working poor.