NEW YORK, Feb 27: President Barack Hossain Obama unveiled yesterday a ten-year budget outline that showed this year's deficit rising to a staggering $1750 billion. He announced a budget proposal of $3.6 trillion for the fiscal 2010.
The administration intends to bring down the deficit from 12.3 percent of GDP this year to about 3.0 per cent in 2013, The budget projects that the US economy will contract by 1.2 per cent this fiscal before bouncing back to 3.2 per cent growth in 2010. None of the new fiscal policy will become effective until the economy recovers.
President Obama's budget is a political gamble of the first order. The budget is nothing less than an attempt to end a three decade era of economic policy dominated by ideas (trickle down economy) of Ronald Reagan, the New York Times in a report said today. While the American people are tightening their belts, Washington seems to be taking its belt off, a Republican party senator was quoted as saying by a reputed paper.
President Obama hopes to shrink the budget deficit , now at levels not seen in past six decades, by raising taxes of the wealthy and affluent people, by reducing war costs and by assuming a rate of economic growth by 2010 that forecasters and even White House advisers consider overly rosy.
He would stop government subsidies to agribusiness with annual turn over of $500,000 and slash $4 billion in annual subsidies to private banks that provide loans to college students. The proposal will bring him face to face with lobbyists promoting farm and banking groups. Republican and corporate groups condemned the tax proposals and left leaning analysts praised the budget as bold. courageous and honest.
Other proposals included in tax increase is a tax on foreign profits of multinational companies and on " carried interest" earned by private equity and hedge fund managers.
While pledging to cut war costs the White House is seeking to provide more than $200 billion for the Iraq and Afghanistan wars over the next two years in addition to increasing Pentagon budget by 4.0 per cent. The president asked for $75 billion in extra spending for Iraq and Afghanistan and another $130 billion for 2010. Pentagon budget ranks 17th largest economy in the world. There are only 16 countries which have annual budget more than the Pentagon. The US defence spending in 2010 would be equal to an average of $21,000 a second (repeat $21,000 a second).
The European Central Bank urged governments to impose strict controls on public spending and wages as fresh data showed region's recession deepening and unemployment rising at a faster rate than earlier anticipated. Jean-Claude Trichet, president ECB said pay restraint would prevent unemployment. The US jobless claims hit the highest level as companies continued to shed jobs. The unemployment rate has reached 7.6 per cent.
Angela Merkel, German Chancellor, has called for global coordination of debt insurance to ensure that governments do not drive up borrowing costs by competing against each other in the capital markets.
Iraq has sweetened the terms it is offering to international oil companies vying to develop the country's reserve in the first concrete example of a global shift of influence from sellers to consumers. The oil price has dropped from $147 a barrel to a mere $35 barrel now proving oil companies to regain their influence. Palestine authority is urging donors to provide it with a financial assistance of $2.8 billion for the reconstruction of the ravaged Gaza Strip and plug holes in its own budget.
Obama's budget a political gamble
From Fazle Rashid | Published: March 01, 2009 00:00:00 | Updated: February 01, 2018 00:00:00
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