President Barack Obama, accompanied by acting Budget Director Jeffrey Zients, speaks in the Rose Garden of the White House in Washington, Wednesday April
President Barack Obama, accompanied by acting Budget Director Jeffrey Zients, speaks in the Rose Garden of the White House in Washington, Wednesday April 10, 2013, to discuss his proposes fiscal 2014 federal budget. (AP Photo/Charles Dharapak) (Charles Dharapak)

WASHINGTON - President Barack Obama says his proposed $3.77 trillion budget for 2014 can shrink federal deficits and expand the U.S. economy. He says: "We can do both."

Obama spoke at the White House Wednesday as his administration issued his budget proposal. It would replace $1.2 trillion in automatic spending cuts scheduled to take effect over the next 10 years with $1.8 trillion in deficit-reduction measures. His plan calls for reductions in Social Security and Medicare spending and increases in taxes, mostly on the wealthy.

He says: "It replaces these cuts with smarter ones."

Obama also would increase cigarette taxes by 94 cents a pack to pay for expanded preschool programs. He also calls for $50 billion in public works spending.