President Barack Obama has presented Congress with his budget proposals for 2011, saying the United States must learn to live within its means.
Mr Obama says America be prepared for painful cuts and a three-year freeze on most government spending.
The president announced a $US3.8 trillion budget plan, which includes increased spending for job creation, but cuts in other areas, and forecast that the US deficit would rise to a record $US1.56 trillion this year, the BBC reports.
Mr Obama scrapped plans to send astronauts back to the Moon and will seek to save $250 billion by capping a range of domestic spending programmes for three years.
Congress must approve the budget for the financial year starting on 1 October for it to take effect.
Mr Obama blamed the huge deficit on the decisions of President George W Bush, previous Congresses and his administration's moves to prevent an economic collapse.
The president said he had no choice but to increase borrowing, as an emergency measure to prevent last year's bad recession becoming a great depression.
He said that in normal circumstances he would have worked to cut the deficit immediately, but expensive steps were need to help the economy. "We cannot continue to spend as if deficits do not matter."
The budget includes about $US100 billion of tax incentives designed to lower double-digit unemployment, including inducements for companies to hire workers.
This will be partially offset by higher taxes on wealthy Americans earning more than $250,000 a year.
The budget also includes more money for education, scientific research and defence programmes.