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U.S. deficit gauged at more than $1 trillion

WASHINGTON – The White House on Friday confirmed a report that President Obama’s new budget predicts a $1.3 trillion deficit for the ongoing fiscal year. The deficit would drop to $901 billion next year under the administration’s tax and spending policies.

In his budget submission on Monday, the president will also repeat his call to raise the top marginal income-tax rate for individuals making more than $200,000 a year and families earning $250,000 to a Clinton-era 39.6 percent rate as part of $1.5 trillion in tax hikes over the coming decade. That proposal alone would raise almost $900 billion over the coming decade.

The election-year document is sure to get a brush-off from Republicans controlling the House.

The White House said Monday’s budget would contain many items from a September submission to a failed congressional deficit “supercommittee,” which deadlocked over tax increases and how much to cut popular benefit programs such as Medicare.

Obama’s budget will also reflect tight caps on agency operating budgets reached in last summer’s budget and debt-limit pact between Obama and House Speaker John A. Boehner (R., Ohio). Those include a $6 billion cut in the budget for core Pentagon operations and cuts to many domestic agencies as well.

But it’s widely assumed that presidential politics will prevent Democrats and Republicans from renewing efforts for a broader budget agreement, though negotiations on Capitol Hill continue in efforts to renew jobless benefits for the long-term unemployed and a cut of 2 percentage points in payroll taxes, and prevent a 27 percent cut in Medicare payments to doctors that’s the product of an outdated funding formula.

The figures were first reported in the Wall Street Journal, which viewed leaked draft budget documents.

The Journal also said Obama would propose a six-year, $476 billion highway and surface transportation bill, and $360 billion from curbs to federal health programs such as Medicare and Medicaid.

There would also be an immediate $350 billion for job-creating measures, less than presented in Obama’s $447 billion September jobs plan.

The White House said last week that its economic assumptions – predictions of the unemployment rate averaging 8.9 percent this year – now look too pessimistic. They were made in mid-November, before recent positive news about the economy.

If the economy performs better than officially projected, it’ll mean a better fiscal performance for the government because greater growth means increased tax revenue.

“The forecast of the unemployment rate that will accompany the budget should be considered stale and out of date,” White House economist Alan Krueger said.

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