By Randall Mikkelsen

WASHINGTON (Reuters) - President Barack Obama's targets for cutting the budget deficit remain in reach, a top aide said on Sunday, despite an alarmingly steep U.S. economic decline that could throw off revenue collections.

White House Budget Director Peter Orzag also fiercely defended a proposed $600 billion plan to tax high-income Americans to pay for a healthcare overhaul and another $600 billion plan to sell companies permits to emit carbon-dioxide gases above a fixed limit.

Republicans have complained that measures would stifle any economic rebound and weaken small businesses.

"I just reject the theory that the only thing that drives economic performance is the marginal tax rate on wealthy Americans, and the only way of being pro-market is to funnel billions and billions of dollars of subsidies to corporations," Orzag said on ABC's "This Week."

Obama last week proposed a $3.6 trillion spending plan for fiscal 2010, with a deficit of $1.12 trillion, and projected the deficit would fall to $533 billion in 2013. He projected a $1.75 trillion deficit for 2009, including the impact of a two-year economic stimulus package costing $787 billion.

The deficit forecasts were based in part on predictions that the economy would shrink 1.2 percent in 2009 before growing again by 3.2 percent in 2010 -- figures already more optimistic than those of most economists surveyed by the Blue Chip Economic Indicators newsletter just before the stimulus plan was approved.

Then on Friday, the government reported the U.S. economy shrank by 6.2 percent in the last three months of 2008, the steepest since 1982 and far worse than most forecasts.

A sharper-than-expected contraction in the economy would lead to weakened government revenue from income taxes and other sources.