WASHINGTON (CNN) - Congress on Wednesday approved a $3.4 trillion budget for the coming year, approving most of President Barack Obama's key spending priorities including increases in health care, education and alternative energy spending.
"What is important to us as a nation is reflected in this budget. It's a very happy day for our country."
Republicans argued the budget reflected reckless taxing and spending priorities that would leave the country in a more fiscally precarious position.
"Budgets are supposed to be about tough decisions, and there are no tough decisions in this budget," House Minority Leader John Boehner, R-Ohio, said.
"It spends an awful lot of money, it raises a lot of taxes, and it puts all of this debt on the backs of our kids and grandkids. This is not the American way. The American way has been about a more limited government."
Under the budget plan, the federal government will run an anticipated deficit of $1.2 trillion in the next fiscal year. The plan promises to cut the deficit by more than half between now and 2012.
"It is clear that more will be needed to address the long-term fiscal imbalance confronting the nation beyond the five-year budget window," Sen. Kent
Conrad said, D-North Dakota.
Under the plan, increases in non-defense discretionary spending are limited to 2.9 percent through 2014. Obama's signature tax cuts from the economic stimulus plan - $400 for individuals and $800 for couples - are slated to expire after 2010.
The measure also allows former President George W. Bush's tax cuts for couples who make more than $250,000 to expire in 2010. The budget compromise largely tracks Obama's initial $3.7 billion
proposed spending plan, with the notable exception to drop his $250 billion request for potential future bailouts of struggling financial institutions.
Fiscally conservative House Democrats, known as Blue Dogs, also negotiated with Democratic leaders to cut $10 billion from the president's $540 billion request for non-defense discretionary spending.
In an additional nod to her caucus' conservatives, Pelosi and House Majority Whip Steny Hoyer sent a letter to Senate leaders "throwing down the gauntlet" to insist that a pay-as-you-go system be followed, which would require new federal spending to be offset with budget cuts or tax increases, a Democratic aide told CNN.
Obama called for the so-called "PAYGO" legislation in his weekend radio address.
The president also gathered his Cabinet members earlier this month and challenged them to cut a total of $100 million in the next 90 days.
In the context of the federal budget, $100 million in savings is a tiny amount, critics charged. It is the equivalent, according to one example, of having a car dealer offer to shave $1 from the cost of a $36,700 vehicle.
"Any amount of savings is obviously welcome," Senate Minority Leader Mitch McConnell, R-Kentucky, said at the time. "But ($100 million is) about the
average amount we'll spend every single day just covering the interest on the stimulus package that we passed earlier this year."
White House Press Secretary Robert Gibbs said ordinary Americans would nevertheless appreciate the savings effort.
"Only in Washington, D.C., is $100 million dollars not a lot of money. It is where I'm from. It is where I grew up. And I think it is for hundreds of millions of Americans," Gibbs said.