Obama announces the 2010 budget

Thursday, February 25. US President Barack Obama has unveiled his nation's budget for 2010 designed to haul America out of the current recession. Among the provisions the new budget makes are a $634bn spend on healthcare reform, the release of $200bn for fighting the wars in Iraq and Afghanistan over the next 18 months and a $250bn reserve fund in case further bailouts are needed for the banking system.

Also included in the budget – which must be passed by Congress before it comes into effect at the beginning of the financial year, on October 1 – are tax-cuts for 95 per cent of American families and the repeal of George Bush's tax-caps for those earning over $250,000 a year. However, Obama also predicted a budget deficit for 2009 of around $1.75tr – the largest shortfall in terms of percentage of GDP since 1945.

"Just as a family has to make hard choices about where to spend and where to save, so do we, as a government," Obama told politicians and reporters gathered at the White House. "You know, there are times where you can afford to redecorate your house and there are times where you need to focus on rebuilding its foundation. Today, we have to focus on foundations."

In the New York Times, Paul Krugman says that the budget is not only designed to haul America out of a depression but to set a "fundamentally new course" for the American economy. "The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration's refusal to get tough on the banks may be deeply disappointing. But fears that Mr Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished."

Better still, says Krugman, this budget looks 10 years into the future rather than five years, as we had become accustomed to under George Bush. "This is budgeting we can believe in…Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can."

Writing in the Guardian, Isabel Sawhill says that though there is little political appetite for the tax cuts and spending plans, they are a financial necessity. "The problem is not a lack of resources – the problem is a lack of political will to make the sacrifices that our current predicament requires. But at least we have started the conversation."

Writing on Politico, Andie Coller says that aside from making political objections to the budget, Republicans now have a tough job in trying to get people to understand what the numbers involved actually mean. "Human beings have a hard time differentiating between millions and billions and trillions, let alone the numerical subsets thereof. To most of us, it just registers as 'a whole lot'," Coller says before quoting Republican Senate minority leader Mitch McConnell who uses a Bible-based analogy to try and gain some perspective. "If you started the day Jesus Christ was born and spent $1 million every day since then, you still wouldn’t have spent $1 trillion."

Coller continues, asking: "What is a fair price for the recovery of the economy or to operate the country? A hundred billion dollars? Five trillion? A dollar a day for a decade? Ten dollars a day for two decades? The typical American doesn't have the tools to make a cost-to-value calculus for the items on offer, so he or she must rely upon those who claim they can - and who do the best job presenting their case."

LAST UPDATED 6:35 PM, FEBRUARY 26, 2009