Obama Offers Budget With Deficits as Far as Number-Crunchers Can See |

As President Obama prepares to unveil his $3.8 trillion budget for fiscal year 2011, which begins Oct. 1, the White House is projecting the current fiscal year will end with a $1.6 trillion deficit, congressional sources confirmed to Fox News.

Next year's budget will have a nearly $1.3 trillion debt, according to those sources, dropping to just over half that -- $700 billion in fiscal year 2013 -- before jumping back up to $1 trillion in 2020, the furthest out that budgeters will predict.

A $1.6 trillion deficit would represent more than 10 percent of the gross domestic product, but the White House says over the next 10 years, the average deficit will represent only 4.5 percent of GDP annually. Last year's deficit was $1.42 trillion.

The numbers come as the president and congressional Democrats have pivoted from preparing a $1 trillion health care proposal to focusing on jobs and the deficit. Speaking at the State of the Union last week, Obama told a joint session of Congress that he wants to freeze spending -- beginning in 2012 -- on discretionary spending except the military, veterans and homeland security. The president said that would save $250 billion over 10 years.

"There's a three-year discretionary spending freeze and that is to say there is a three-year cap on domestic discretionary spending," said Obama senior adviser David Axelrod on CNN. "Within that cap we're going to have to prioritize just like every business or every family would, so we're going to have to do away with the things that we don't need in order to pay for the things that we do."

"We don't expect this is going to be easy," Fox Business Network reported White House Communications Director Dan Pfeiffer saying. Pfeiffer added that the White House proposed cuts last year but Congress funded programs anyway.

But keeping budget deficits where they are currently projected will happen only if tax cuts passed in 2001 and 2003 expire as scheduled at the end of this year. The White House calculates tax hikes would generate $1.2 trillion in revenue over 10 years.

"We just did an 84 percent increase in a very short period of time of all this new spending. Democrats, since they took over Congress, increased domestic discretionary spending by $1.4 trillion," Rep. Paul Ryan, R-Wis., said on "Fox News Sunday."

"We don't think taking all this money out of the private economy up to Washington and spending it through Washington is the way to create jobs. We believe we should keep that money in the economy," Ryan added.

Congressional sources say Obama's new budget will propose extending the popular middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year.

It also calls for $250 payments to 57 million Social Security recipients to bolster their finances in a year when they are not receiving inflation-pegged, cost-of-living increases because the consumer price index is so low.

In the president's budget, Obama is going to set aside $160 billion for the war in Afghanistan and ongoing operations in Iraq.

Fox News' Major Garrett and Chad Pergram contributed to this report.

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