WASHINGTON (AFP) - President Barack Obama Monday unveiled a budget projecting a record deficit this year, with billions of dollars to curb unemployment and tax hikes on the rich to tame big fiscal shortfalls. Its a budget that reflects the serious challenges facing the country, Obama said at the White House after sending the mammoth spending plan to Congress. Were at war, our economy has lost seven million jobs the last two years and our government is deeply in debt after what can only be described as a decade of profligacy. The 3.834 trillion dollar budget includes a freeze on non-security discretionary spending, a 100 billion dollar jobs package and more money for overseas wars, education and homeland security. It makes a grim forecast that unemployment, currently at 10 percent, will average 9.2 percent in 2011, and 8.2 percent in 2012, the year when Obama faces a reelection campaign, carrying a punishing legacy of the worst financial crisis since the Great Depression. The economic forecast, however, predicts solid GDP growth of 2.7 percent in 2010 and 3.8 percent in 2011. The budget, for fiscal year 2011, foresees a record deficit of 1.556 trillion dollars in 2010, falling to 1.267 trillion dollars in 2011, and abandons a bid to send men back to the moon, by ending the Constellation program. The Obama administration said the 2011 budget is aimed at dealing with the aftermath of the financial, fiscal, housing and unemployment crises, and to put the United States on a path to long-term economic security. The budget will also set the battle lines for the political debate in the run-up to mid-term congressional elections in November, in which Obamas Democrats, paying the price for high unemployment, fear heavy losses. The administration says that the deficit will stand at 1.267 trillion dollars in 2011, which will represent 8.3 percent of Gross Domestic Product, compared to 10.6 percent of GDP in 2010. Republicans and some conservative Democrats have raised the alarm at high government spending, which has swelled the deficit, and the issue has been a source of considerable political pressure for Obama. But some analysts warn it is too early to focus on cutting deficits and fear the tactic risks slowing the spending needed to stimulate the economy and generate jobs. Obamas budget chief Peter Orszag told reporters that the administration thought it had the balance right, between spurring recovery and making a start of trimming deficits which pose a grave long-term economic threat. Federal spending is a little like an aircraft carrier, you have to start turning the ship well ahead of time, he said. The 2011 budget contains more than 300 billion dollars in tax cuts for families and businesses over the next 10 years and terminates 120 programs for savings of 20 billion dollars. It will, however, allow tax cuts introduced by former president George W. Bush to expire for people earning more than 250,000 dollars a year. One of the key things we are focusing on, is jump-starting job creation, said Orszag, who heads the presidents Office of Management and Budget. To that end, there is 100 billion dollars for job-creating investments in small businesses, tax cuts and clean energy, designed to start bringing down the current 10 percent unemployment rate. As the administration combines a push for green energy development with deficit cutting, the budget will phase out fossil fuel subsidies for oil, gas and coal companies to raise 40 billion dollars over 10 years. Following the thwarted bid by an Al-Qaeda affiliated group in Yemen to bring down a US airliner on Christmas Day, the budget also makes new investments in US security. The Homeland Security Department gets a two percent funding raise to 43.6 billion dollars, which will include money to deploy 1,000 new imaging technology screening machines and explosives detection equipment at airports. The budget will also provide funding for more federal air marshals on international flights in a bid to ward off future attacks, the officials said. The cost of US military operations overseas, including in Afghanistan and Pakistan, are put at 159.3 billion dollars in 2011 while the administration will make a supplemental request for 2010 of 33 billion dollars to cover war spending. The State Department also gets a funding increase up 2.6 percent from the presidents funding request in 2010. The budget will be accompanied by Obamas call for a bi-partisan Fiscal Commission to identify deficit cutting policies over the long term and to balance the budget.