A model for terahertz (THz) generation by optical rectification using tilted-pulse-fronts is developed. It simultaneously accounts for in two spatial dimensions (2-D) (i) the spatio-temporal variations of the optical pump pulse imparted by the tilted-pulse-front setup, (ii) the nonlinear coupled interaction of THz and optical radiation, (iii) self-phase modulation and (iv) stimulated Raman scattering. The model is validated by quantitative agreement with experiments and analytic calculations. We show that the optical pump beam is significantly broadened in the transverse-momentum (kx) domain as a consequence of its spectral broadening due to THz generation. In the presence of this large frequency and transverse-momentum (or angular) spread, group velocity dispersion causes a spatio-temporal break-up of the optical pump pulse which inhibits further THz generation. The implications of these effects on energy scaling and optimization of optical-to-THz conversion efficiency are discussed. This suggests the use of optical pump pulses with elliptical beam profiles for large optical pump energies. Furthermore, it is seen that optimization of the setup is highly dependent on optical pump conditions. Trade-offs in optimizing the optical-to-THz conversion efficiency on the spatial and spectral properties of THz radiation are discussed to guide the development of such sources.