Obama seeks budget savings as huge deficits loom

By Caren Bohan and Jeff Mason

WASHINGTON (Reuters) - President Barack Obama on Thursday will suggest wringing $17 billion in savings from the fiscal 2010 budget as he seeks to allay worries about soaring deficits and build support for a hefty domestic agenda.

In an announcement planned for 10:30 a.m. EDT, Obama will offer a list of savings he will seek in programs from weapons systems to education to the cleanup of abandoned mines, White House officials said.

The list will accompany new details of the proposed fiscal 2010 budget Obama released in February.

But the proposals to trim 121 programs identified by the White House as wasteful or unnecessary amounted to only one half of 1 percent of the $3.55 trillion budget Obama has laid out for the fiscal year that begins in October.

That budget aims to overhaul the health care system to provide coverage to the uninsured and bolster education programs. Obama also wants to help fight climate change by capping emissions of greenhouse gases such as carbon dioxide, or CO2, from big industries and allowing them to trade rights to pollute. Such systems are commonly called "cap and trade."

Both critics and supporters of Obama consider the plan ambitious. Some proposals such as the climate initiatives face a tough sell in the U.S. Congress.

Amid spending on the wars in Iraq and Afghanistan and bailouts for the banking and auto industries, the White House has forecast that the budget deficit will hit $1.75 trillion in the current 2009 fiscal year. The administration expects the deficit to drop to a still-huge $1.17 trillion in 2010.

Earlier this year, Obama won passage in the Democratic-led Congress for a $787 billion economic stimulus package of public works projects and tax cuts aimed at countering the recession.

Republicans have charged that Obama's budget marked a move toward big government and would burden the economy with high deficits.

Obama has pointed out that he inherited a more than $1 trillion deficit from former President George W. Bush, a Republican, as well as a recession that Obama said required action in the form of the stimulus package and bailouts.

Some Democrats also have expressed wariness about the deficit outlook, though the Democratic-led Congress already has passed a $3.4 trillion budget blueprint that will guide tax policy and government spending for the upcoming fiscal year.

That plan embraces many of Obama's top priorities but the difficulty will be in hammering out detailed legislation.

DEFENSE CUTS

Of the spending cuts Obama will spell out on Thursday, about half would be in the defense budget.

Many of those cuts had been announced already by Defense Secretary Robert Gates, who has proposed trimming missile-defense spending and canceling multibillion-dollar weapons programs as part of a broad overhaul of the department's spending.