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Budget deficit to reach $1.2 trillion

Braaq

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:shootme:

WASHINGTON — The federal budget deficit will rise to a record $1.2 trillion this year, and a package of new spending increases and tax cuts planned by President-elect Barack Obama and congressional Democrats will push that figure higher, the Congressional Budget Office reported today.

In the first official reckoning of the damage caused by the severe recession, the report paints a bleak picture for 2009: a 2.2% drop in the size of the nation's economy, a jump in the jobless rate to 9.2% in early 2010, a 14% drop in home prices and a 1% decline in consumption.

The year-old recession, brought on by the slump in housing and its impact on financial institutions, "will probably be the longest and the deepest since World War II," the CBO said.

The budget deficit also will be the largest since World War II, and deficits will continue to haunt the federal government for the next decade, totaling $3.1 trillion. That's without any action by Obama and Congress to fix the economy, which will cause deficits to rise, the CBO said.

The report predicted that revenue will drop by $166 billion this year, or 6.6%. Spending will increase by more than $400 billion because of the government's takeover of the Fannie Mae and Freddie Mac housing corporations and the federal bailout of financial institutions.

Even when the recovery kicks in, it will be slow, the report concluded. The economy should increase by only 1.5% in 2010, it said.

"Although financial conditions are expected to improve, the pace of improvement will be restrained because it will take time for financial institutions to recover from losses due to loan defaults," the report said. "As a result, borrowers will continue to find the terms and availability of credit tight, which will increase the cost of capital and hold back the growth of investment and consumption, dampening economic activity for several years."

The report said the supply of vacant homes will slow the rebound in housing construction. "Spending also will be muted as households continue to adjust to the large declines in wealth of the past few years," the report said.

And foreign economies will not provide an offsetting boost in demand due to their own weakened conditions.

The report elicited gloom on Capitol Hill, where lawmakers nonetheless are planning about $800 billion in tax cuts and new spending to jump-start the economy.

"CBO's deficit projections are jaw-dropping," said Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee. "This is one of the worst budget forecasts I have seen in my lifetime. President-elect Obama is being handed an absolute fiscal disaster."
 

Braaq

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Obama predicts $1 trillion deficit 'for years to come'

WASHINGTON — President-elect Barack Obama warned Tuesday that the nation could face "trillion-dollar deficits for years to come" but vowed to pursue long-term budget changes as he presses for immediate new spending and tax cuts to jump-start the struggling economy.

Two weeks before he takes office, Obama said his budget aides told him that he will inherit huge deficits following the government's multibillion-dollar financial bailouts. He vowed to block pet projects sought by members of Congress, known as "earmarks," create an economic recovery oversight board and post details of all spending projects on the Internet.

"We're going to have to bring significant reform not just to our recovery and reinvestment plan, but to the overall budget process," Obama said after meeting with economic advisers at his transition office.

"We're going to have to stop talking about budget reform," he added. "We're going to have to totally embrace it."

Obama vowed again that he would block earmarks from the massive economic stimulus package now being drafted in Congress, which will include road and bridge projects and $300 billion in tax cuts. He made his remarks surrounded by aides including Peter Orszag, his choice for White House budget director, Treasury secretary nominee Timothy Geithner, and Lawrence Summers, his choice for National Economic Council director.

The president-elect did not specify the size of the stimulus package or of his first budget, which will be submitted to Congress in early February. He vowed to work with both parties in Congress and is "willing to make some difficult choices in how we get a handle on this deficit."

The president-elect's comments on earmarks came as the chairmen of the House and Senate appropriations committees unveiled new rules on how their panels will deal with earmarks.

Rep. Dave Obey, D-Wis., and Sen. Daniel Inouye, D-Hawaii, will require lawmakers to post on their websites all funding requests for special projects when they make them and explain the value of their project. In addition, all requests will be published earlier than previously required. Now, these requests will be outlined when they are considered by subcommittees, rather than at the full committee level.

Obey and Inouye also said they plan to hold the total cost of earmarks to less than 1% of discretionary spending.

In a related issue, Sens. Kent Conrad, D-N.D., and Judd Gregg, R-N.H., have proposed a special commission to develop spending cuts and tax hikes that would be voted up or down as a package. The model would be the commission set up by Congress to shut down military bases.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said Obama is saying the right things but faces a political challenge in meeting his goals for deficit reduction.

MacGuineas, whose organization forecast a trillion-dollar budget deficit last year, said it is easy to see Congress borrowing money for the stimulus and then "turning their attention elsewhere."

The only solution, she said, is a package of spending cuts and tax hikes, "and they're going to have to be big."
 

Ironslave

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Sickening... If only someone from congress had the guts to go on national TV today and speak out against all this.



 

Braaq

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Sickening... If only someone from congress had the guts to go on national TV today and speak out against all this.




If only people would listen... I am happy at least other people such as news agencies are realizing what RP is saying.
Hey! I have an idea! Lets spend ourselves out of debt! :carduindisguise
 

Ironslave

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If only people would listen... I am happy at least other people such as news agencies are realizing what RP is saying.
Hey! I have an idea! Lets spend ourselves out of debt! :carduindisguise

Yep, it was a great interview too.
 
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