Obama budget: White House defends $1.267 trillion federal deficit

But the new White House budget doesn't tame deficits down to 3 percent of GDP in any year this decade. And the numbers count on the economy growing a bit faster than 3 percent a year.

That’s an optimistic target, some economists outside Washington say. The investment firm Goldman Sachs, for example, recently predicted that real GDP would grow at a disappointing 2.2 percent rate in the US this decade.

If the White House forecasts are correct, then a $1 trillion deficit in 2020 would equal 4.2 percent of that year's GDP – about half the size of Obama's planned deficit next year, as a share of GDP.

Obama's budget math is a testament to the difficult challenge that would face any president now.

A look ahead indicates that the national debt is fast approaching an amount equal to one year's GDP – a trend that could put America's AAA credit rating at risk in coming years. It will be hard, economists say, to set a sustainable fiscal course without some combination of more tax hikes and deeper spending cuts.

So far, Obama has drawn a firm line that households with incomes below $250,000 will not see their taxes go up.

But for now, another problem looms equally large – what Mr. Orszag calls the "jobs deficit" created by recession. In 1937, he noted, the US relapsed into the Depression when Franklin Roosevelt took steps to close federal deficits before the economy had found its footing.

Obama has proposed a jobs bill including several tax breaks designed to spur new hiring and consumer spending.

Republicans say that the deficit spending is failing to create jobs and that Obama's move to freeze a portion of federal spending doesn't go far enough toward restoring discipline.

"President Obama is submitting another budget that spends too much, taxes too much, and borrows too much,” House minority leader John Boehner (R) of Ohio said in a statement. He touted a Republican deficit-reduction plan prepared by Rep. Paul Ryan of Wisconsin.

Obama is working to set up a bipartisan commission to tackle the fiscal gap. But it will probably require urgent signals from financial markets, some budget experts say, before Congress will be ready to deal in a bipartisan way on the issue.

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