The budget projects a $1.75 trillion deficit this year.
The President criticized past budget practices and called his budget an "honest accounting" that includes the "true costs" of the ongoing wars in Iraq and Afghanistan.
The budget priorities represent cutting what we don't need to pay for what we do, he said.
The spending plan includes $50 billion a year for 2011 and 2012 to fight the ongoing wars in Afghanistan and Iraq. It also aims to cut the federal budget deficit in half by 2013.
The spending plan includes a 10-year, $634 billion reserve fund for health care reforms. It's seen as a down payment, of sorts, on universal health coverage.
The administration is expected to fill out the budget blueprint with more details in the spring.
The Obama budget is sure to set off a new round of partisan squabbling over budget priorities amid a deepening recession.
Obama often speaks of ushering in a new era of fiscal responsibility while his administration is committed to massive spending to jolt the ailing economy. Last week, the President signed a nearly $790 billion economic stimulus bill.
Meantime, the House this week approved a $410 billion spending bill to keep the government running through September. The Senate has yet to act on the measure.