Jan. 6 (Bloomberg) -- President-elect Barack Obama said he expects to inherit a $1 trillion budget deficit and that similar shortfalls are in store “for years to come” as the government grapples with a recession and other spending demands.

A “trillion dollar deficit will be here before we even start the next budget,” Obama said after meeting in Washington with his economic advisers, including Peter Orszag, who has been designated as director of the Office of Management and Budget. “Potentially we’ve got trillion-dollar deficits for years to come, even with the economic recovery we are working on.”

Obama, who takes office Jan. 20, is pressing Congress to act quickly on an economic stimulus plan of about $775 billion over two years to pull the U.S. out of a recession. That will add to pressure on the fiscal 2010 budget that Obama will be submitting to lawmakers in the coming weeks.

The deficit was a record $455 billion in fiscal 2008, more than double a year earlier. The 2009 fiscal year runs through Sept. 30. The Congressional Budget Office will issue a budget and economic outlook snapshot tomorrow.

Obama said he wants his budget and economic teams to craft a stimulus plan that stabilizes the economy and begins the process of “getting our budget under control.” That includes barring lawmakers from inserting pet spending projects, known as earmarks, into the legislation, he said.

‘Unsustainable’ Spending

Some congressional Democrats, including Senate Budget Committee Chairman Kent Conrad of North Dakota, are calling the incoming administration to come up with a long-term plan to cut the deficit. Conrad said today on Bloomberg TV that the nation’s financial situation is “unsustainable for the long term.”

A plan for dealing with budget imbalances “has to be put in place” as the new administration and Congress craft a stimulus plan, he said.

Obama said he agrees.

“It’s not just Democratic or Republican colleagues on the Hill that are concerned about this, I’m concerned about this,” Obama said. “I’m going to be willing to make some very difficult choices in how we get a handle on this deficit.”

In Congress, House Appropriations Committee Chairman David Obey and his Senate counterpart Daniel Inouye, said in a statement today they will attempt to impose budget controls by cutting funding for most types of earmarks in this year’s budget in half from 2006 levels and requiring lawmakers to publish explanations of their requests.

Advisers

Along with Orszag, those who took part in the session were Timothy Geithner, Treasury secretary-designate; Christina Romer, director-designate of the Council of Economic Advisors and Lawrence Summers, director-designate of the National Economic Council.

The meeting was called to “review the medium-term budget outlook” and discuss crafting a fiscal 2010 budget that puts the U.S. on a path to deficit reduction as the economy recovers, Obama’s transition office said in a statement.

The president-elect wouldn’t give an estimate of how big the 2010 spending plan would be. The most recent budget submitted by President George W. Bush was $3.1 trillion for the 2009 fiscal year, which started last Oct. 1.

Budget Outlook

Obama may propose a fiscal 2010 budget of as much as $3.4 trillion for the year beginning Oct. 1, a record, and up about 9 percent from the document Bush submitted almost a year ago, said Brian Riedl, a budget analyst at the Heritage Foundation, a Washington research group promoting free enterprise and small government. The increase would partly reflect the $700 billion bailout for Wall Street and the economic stimulus package.

Obama is likely to submit a broad outline of his 2010 budget plan by mid-to-late February, followed by a full spending blueprint in April, according to Riedl and other budget experts.

“There are no set rules” for presenting a budget in a year of transition, Riedl said. The early preview of Obama’s budget, perhaps running a dozen or so pages, may contain the Obama administration’s “rhetorical assumptions” about the cost of specific programs with little detail, he said.

The Congressional Budget Act requires the president’s budget to be submitted between the first Monday in January and the first Monday in February, said Stan Collender, a budget analyst in Washington.

That presents a challenge for a new president because the February deadline is only about two weeks after Inauguration Day. As a result, the new administration usually submits a brief, top- line budget late in February and then a more detailed submission a month or two afterwards, said Collender, a former House and Senate Budget Committee analyst.

Tax Cuts

As part of his recovery plan, Obama is pushing for tax cuts that may be worth about $300 billion and would be designed to boost consumer demand by giving breaks worth $500 for individuals and $1,000 for couples, according to a House Democratic aide.

When asked about the tax cuts in the stimulus, Obama declined to specify whether the tax breaks would phase out at a certain income level, saying he is still working out details.

“I think you can get some guidance from what I’ve said during the campaign,” Obama said. “But I don’t want to be locked into a particular number.”

During the campaign Obama outlined a plan that would provide a tax cut or credit for all workers with household incomes below $200,000, while raising taxes on those earning more than $250,000.

To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

Last Updated: January 6, 2009 15:44 EST