KEY POINTS:
George W. Bush has unveiled a fiscal plan that will double the US federal Budget deficit this year and leave larger-than-planned deficits stretching well into his successor's term of office.
US Government borrowing this year and next would approach the previous all-time record deficit, of US$413 billion in 2004, Bush said.
However, the US$3.1 trillion ($3.9 trillion) spending plan will freeze or cut expenditure on many domestic policy programmes, with increases planned only for the defence budget.
The shortfall is a result of weaker tax revenues, the White House conceded, due to the extent of the coming US slowdown, which will be depressed even before Bush's extension of his tax credits scheme is taken into account. Supporters of tax cuts say these reforms will promote enterprise and growth.
As the chances increase of America sliding into recession under the weight of an intensifying housing slump, the sub-prime crisis and the credit crunch, Bush said that the federal deficit would reach US$410 billion for the budget year 2008 that ends on 30 September and US$407 billion for fiscal 2009.
The Budget makes military spending and the Iraq war its focus, proposing a 7.5 per cent increase for the Pentagon. Military expenditure will top US$515 billion - plus US$70 billion more for the conflicts in Iraq and Afghanistan.
The proposals received a hostile reception from both sides on Capitol Hill.
House Budget Committee chairman John Spratt, a Democrat, said: "Far from proposing a plan to fix the Budget, the Bush Administration proposes policies that worsen it," leaving the consequences for the next administration.
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