Barack Obama will on Monday propose slashing the country’s budget deficit by $1,100bn over the next decade, an administration official said, as the White House prepares to lay out its most restrained economic and fiscal policy agenda since the US president took office two years ago.

With the economic recovery gathering strength and a debate over fiscal credibility dominating the US political scene, the administration’s budget proposal would “ask Washington to live within its means, while at the same time investing in our future”, Mr Obama said at the weekend.

Precise details of the budget are still under wraps, but administration officials said two-thirds of the deficit reduction would come from lower levels of government spending, including a five-year freeze on discretionary programmes unrelated to national security and defence that would save $400bn through to 2021.