However it also calls for $634bn to be spent on healthcare reform and requests an additional $750bn to be set aside for possible further bank bailouts, reports say.

In depth

Obama's defence problem

"Having inherited a trillion dollar deficit, we need to focus on what we need to move the economy forward," he said on Thursday after formally sending the budget to congress.

Obama also said the true costs of the wars in Iraq and Afghanistan would no longer be "left off the books", with the 2010 budget seeking $534bn for defence spending.

Poor figures

Republicans were swift to respond to the proposed budget, with many expressing concerns over the cost of the plan.

"I have serious concerns with this budget, which demands hardworking American families and job creators turn over more of their hard-earned money to the government to pay for unprecedented spending increases," Mitch McConnell, senate Republican leader, said in a statement.

US budget

Budget forecasts spending of $3.5trn in 2010.

Out of that amount, Obama wants $634bn fund to reform the US healthcare system and expand coverage to uninsured Americans.

Also requests increase in defence spending to $534bn.

Specific request for $130bn to fund wars in Afghanistan and Iraq.

Extra $250bn for possible further bank bailouts to "stabilise the financial system"

The budget must be passed by congress, and Al Jazeera's Rob Reynolds says Republicans will raise concerns that the budget costs too much and expands government power.

However, Republicans will have to make a political calculation of whether such complaints will be in their party's political interests, as Obama has popularity and momentum, and Republicans could find themselves isolated, he says.

The news comes as latest round of poor economic data emerged, with figures showing that the number of number of people making new unemployment claims rose to 667,000 from 637,000 last week, the US labour department said.

The rise means more than 5.1 million Americans are now receiving unemployment benefits.

In addition, the number of new home sales in the US fell to a record low of 309,000 in January as the fallout from the US's collapsed housing market continues.

The US commerce department said on Thursday that sales fell 10.2 per cent, the worst showing on records going back to 1963.

And US car giant General Motors announced on Thursday a $9.6bn loss in 2008's fourth financial quarter, making its total loss for the year 2008 $30.9bn.

The company has received $13.4bn in federal loans since December 31 and
says it needs up to $30bn to stay out of bankruptcy protection.