Washington  - US President Barack Obama on Thursday outlined his 2010 budget and projections for the next 10 years, offering a look at how he hopes to pay for many of the ambitious priorities he set out on the campaign trail and over his first month in office.

The budget includes a cap-and-trade programme to reduce climate- damaging emissions. It would make permanent a set of tax cuts for middle-class workers enacted last week, while rolling back tax cuts for the wealthy that were enacted by former president George W Bush in 2001 and 2003.

Together, the administration forecasts a 2009 federal budget deficit of 1.75 trillion dollars - more than 10 per cent of US gross domestic product - but insisted that it can meet Obama's promise to slice the deficit by more than half before the end of his first four- year term in office.

Obama said his team had identified 2 trillion dollars in deficit reductions over the next four years through the tax hikes and cutting wasteful programmes in health care, education, agriculture and other departments.

"This budget is an honest accounting of where we are and where we intend to go," Obama said. The budget for the first time includes cost estimates for the wars in Iraq and Afghanistan, which had been left off the books by the Bush administration.

Obama provided an outline to Congress on Thursday. A full 2010 budget will be handed over in April for approval.

Obama warned that tackling the ongoing US recession would have to take priority over the ballooning deficit in the near term, and that all sides would "have to compromise on certain things we care about."

While some of the exact figures had yet to be released, the budget entails up to 750 billion dollars more for struggling Wall Street banks - including another 250 billion dollars this year - and more than 600 billion dollars for a new health care "reserve fund," according to US media reports.

Obama has promised an ambitious set of reforms in health, education and energy over the coming years - all issues where previous administrations have struggled to make inroads.

While Obama's plans offer an insight into his own spending priorities, they also assume that Congress will follow through with the corresponding legislation, much of which remains in its infant stages and is highly controversial.

That includes a cap-and-trade plan that would force companies to pay for carbon-dioxide emissions blamed for global warming. The administration has said it can raise up to 300 billion dollars per year in revenue, which already exists in Europe.

But legislation to create the system failed in 2008 and a revived effort has been making slow progress in Congress this year. Many expect a cap-and-trade plan won't become law until 2010 at the earliest.

The budget also includes 15 billion dollars per year in spending on renewable energy investments. (dpa)