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Daily Archives: August 26, 2009

White House raises deficit forecast to 9 trillion dollars

The White House projected yesterday a whopping 9.05-trillion-dollar US government budget deficit over the next 10 years, an increase of two trillion dollars from its previous estimate.
The administration of President Barack Obama, however, trimmed the 2009 budget deficit projection to 1.58 trillion dollars from a previous estimate of 1.84 trillion dollars.
The mid-session review of economic forecasts and budget projection "shows a smaller 2009 deficit but larger out-year deficits than previously projected," said the White House's Office of Management and Budget director Peter Orszag.
"Overall, it underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path," he said.
Due to lower estimated costs of financial assistance, particularly bank rescues, amid the economic crisis, the Obama administration hopes to see a 262-billion-dollar improvement in the projected 2009 deficit, he said.
The estimated deficit for the 2009 fiscal year of 1.58 trillion dollars was 11.2 percent of gross domestic product – down from the previously projected 12.9 percent of GDP, Orszag said.
The new budget figures are expected to fuel a fierce political debate over the fiscal situation and rising national debt as Obama's Republican critics step up their calls for the president to abandon his plans to remake US healthcare and combat climate change.


Obama to reappoint Bernanke

US President Barack Obama was set to announce yesterday a second term for Ben Bernanke as Federal Reserve chairman, following months of joint combat against the financial crisis.
Taking a break from his vacation on well-heeled Martha's Vineyard off the US east coast, Obama would re-appoint Bernanke to a second four-year term beginning in January, a White House official said on condition of anonymity.
Obama was scheduled to deliver the statement, with Bernanke by his side, in the resort town of Oak Bluffs at 9 am (1400 GMT) before US markets open.
White House chief of staff Rahm Emanuel told the Wall Street Journal that Obama was reappointing the cerebral Bernanke because he credits him with "pulling the economy back from the brink of depression."
Bernanke was selected as Federal Reserve chairman by Obama's predecessor, George W. Bush, in 2005 to replace retiring Fed chairman Alan Greenspan, who served for 18 years and presided over a golden era of economic prosperity.
At the tail end of Bush's second term and the beginning of Obama's presidency, Bernanke has been a key player in stabilizing markets and prescribing the antidote to the worst crisis since the Great Depression of the 1930s.
He has enjoyed broad support on Wall Street, for the sweeping and sometimes unorthodox methods he has used to save the banking sector, redefine the financial industry and keep the recession from turning into a depression.
But Obama may face some opposition in Congress to his decision to reappoint the central banker.
US Senate banking committee chairman Chris Dodd vowed to hold a "thorough and comprehensive confirmation hearing" for Bernanke's renomination, which requires Senate confirmation.
"I still have serious concerns about the Federal Reserve's failure to protect consumers and I strongly believe these responsibilities should go to an independent consumer financial protection agency," Dodd said in a statement, while calling Obama's decision "probably the right choice."
Obama's move may be calculated to send a signal of continuity and to reassure financial markets that are still fragile, despite signs the global economy is slowly returning to growth – especially outside the United States.
Changing the Fed chairman at such a time might have spooked investors and been seen as a dramatic reversal of policy, considering Bernanke was such a key player in fighting off the crisis.