The president said that much of the responsibility for the country's current economic situation lies with the George W. Bush administration.
"The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon, Mr. Obama said. "Yet over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars without paying for any of it -– all of which was compounded by recession and by rising health care costs."
"As a result," he added, "when I first walked through the door, the deficit stood at $1.3 trillion, with projected deficits of $8 trillion over the next decade."
Mr. Obama's budget proposal – which he acknowledged "won't be able to bring down this deficit overnight, given that the recovery is still taking hold and families across the country still need help" – includes small business tax credits, investments in clean energy, a three-year cap on non-defense and entitlement discretionary spending, and a six percent increase in Department of Education funding.
It does away with what the president called "a wasteful subsidy to banks that lend to college students," with the money going to community colleges and student aid. It also imposes a fee on banks to pay for the bank bailout, and rolls back the Bush tax cuts on people making more than $250,000 per year.
He suggested certain cuts – to a program that paid states to clean up mines that were already cleaned up, a Forest Service economic development program that funded a music festival, and to funding for an unnecessary refurbishment of a Department of Energy science center – were easy.
Others, he said, were not.
"We eliminate one program that provides grants to do environmental clean up of abandoned buildings," the president said. "That's a mission I support, but there are other sources of private and public funds to achieve it. We also eliminated a $120 million program that allows folks to get their Earned Income Tax Credit in advance. I am a big supporter of the Earned Income Tax Credit. The problem is 80 percent of people who got this advance didn't comply with one or more of the program's requirements."
Mr. Obama asked Democrats and Republicans in Congress to "take a fresh look" at programs that could be cut back or eliminated, and said that while the Department of Defense isn't having its budget frozen, "it's not exempt from budget common sense." He pointed to spending to build C-17 transport aircraft that the Pentagon said it didn't need, calling it "waste, pure and simple."
As he did in his State of the Union address last week, the president lauded pay-as-you-go, or PAYGO, policies that say all tax cuts or spending increases must be paid for.
"The bottom line is this," said the president. "We simply cannot continue to spend as if deficits don't have consequences; as if waste doesn't matter; as if the hard-earned tax dollars of the American people can be treated like Monopoly money; as if we can ignore this challenge for another generation. We can't."
"It's time to save what we can, spend what we must, and live within our means once again," he added.
House Minority Leader John Boehner quickly criticized the budget proposal, saying it "spends too much, taxes too much, and borrows too much."