To have 10% of GDP as Deficit and that too when you measure it against growth rate of 5.7%, the trend is not encouraging.However the decision to invest in Education and Research will yield long term benefits.
The basic issue to be addressed to i.e.cut down conspicuous consumption and stimulating growth , is missing.Unless this is done along with less spending on peripheral products rather than infrastructural projects, the US Economy shall continue to tatter.To sustain growth in Employment, small businesses need to be given incentives, while easing credit policies on them along with reduction in Imports of products and services.
Story:
Dubbed an old-style liberal tax-and-spender by his Republican opponents, Obama is under pressure to convince investors and big creditors like China that he has a credible plan to control the country’s deficit and debt over time.
While maintaining policies this year aimed at protecting a still-fragile economic recovery, in common with other major industrial nations, Obama will save money by curbing 120 federal projects, including a powerfully symbolic mission to return to the moon, but invest more in education and research.
Polls show voters are worried by the weak condition of U.S. finances, and Obama plans to create a bipartisan fiscal commission to figure out future options on taxes and spending.
Obama’s budget for the fiscal year to September 30, 2011, which must be approved by the U.S. Congress, forecasts a deficit of $1.56 trillion in 2010, equal to 10.6 percent of the economy measured by gross domestic product (GDP).
The figures were given to reporters in a preview of the budget, which is due for release at 10:00 a.m. EST. Obama is scheduled to discuss it at 10:45 a.m.
This latest rise was partly due to spending linked to a package of emergency stimulus measures Obama signed last year.
The increase in the deficit compared with a $1.41 trillion shortfall in 2009 that amounted to 9.9 percent of GDP. But this funding gap was forecast to dip to $1.27 trillion in 2001, or 8.3 percent of GDP, and fall to roughly half that as a share of the economy in the final year of Obama’s term in 2012, meeting a key pledge.
NO CAP-AND-TRADE REVENUE SEEN
The budget incorporates healthcare legislation before lawmakers. But an administration official told Reuters $646 billion in projected revenue from a controversial cap-and-trade climate change bill had been dropped from the budget, implying the White House is doubtful the measures will pass Congress.
“To continue job creation and to continue economic growth over time, it is important to bring those out-year deficits down,” White House budget chief Peter Orszag told reporters.
U.S. growth jumped by 5.7 percent at an annual pace in the fourth quarter, but this has yet to translate into greater hiring, and unemployment of 10 percent is near a 26-year high.
http://www.reuters.com/article/idUSTRE60U00220100201?feedType=nl&feedName=usmorningdigest
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