WASHINGTON - PRESIDENT Barack Obama launched a bid on Thursday to transform the US political landscape, with a US$3.55 trillion (S$5.5 trillion) budget mapping out the sweeping scale of his administration's ambitions.

Budget highlights Deficit: 2009 deficit projected at US$1.75 trillion (S$2.7 trillion), or 12.3 per cent of the GDP, the largest since World War II. Taxes: Some of the Bush-era tax cuts to expire on schedule for those making more than US$250,000 a year. Highest US income tax bracket to rise from 35 per cent to over 39 per cent. ... more

The document handed to Congress bristled with spending on healthcare, climate change, the military and education, included a rosy prediction of a return to growth next year and raised taxes on the wealthiest Americans.

'This budget is an honest accounting of where we are and where we intend to go,' Mr Obama said at the White House, while warning that the size of the deficit required tough decisions on spending priorities.

'There are some hard choices that lie ahead,' said the president, who is responding to the economic crisis by leading the biggest government intervention in American life in decades.

'We need to be honest with ourselves about what costs are being racked up, because that's how we'll come to grips with the hard choices that lie ahead.'

The budget for 2010 assumes major cost savings from the planned drawdown of the US garrison in Iraq, which currently costs US$170 billion a year.

The budget forecasts a US$1.750 trillion deficit in fiscal 2009, but foresees that figure falling to US$1.171 trillion in 2010.

The plan sees the deficit soaring to the largest percentage of gross domestic product since World War II, but the president touted a string of cost savings designed to lay new foundations for the US economy.

It also includes an optimistic forecast that the struggling US economy will post robust growth next year, projecting a 1.2 per cent contraction in calendar 2009 but an expansion of 3.2 per cent in 2010.

Mr Obama's budget chief Peter Orszag dismissed suggestions that the growth forecast was too rosy, saying 'We're not raising the price before the sale.'

The 2010 spending of US$3.552 trillion is down from the current year's total of US$3.938 trillion.

The projected spending would include around US$200 billion to fight wars in Iraq and Afghanistan over the next 18 months, and a huge US$634 billion, 10-year fund to pay for healthcare reform, a key plank of Mr Obama's election campaign.

Overall defence spending for 2010 is to reach US$663.7 billion and includes the costs of wars in Iraq and Afghanistan, an increase of roughly 1.5 per cent. -- AFP