Obama unveils $3.83trn budget with huge deficits
US President Barack Obama yesterday sent Congress a $3.83 trillion (Dh14trn) budget that would pour more money into the fight against high unemployment, boost taxes on the wealthy and freeze spending for a wide swath of government programmes.
The deficit for this year would surge to a record-breaking $1.56trn, topping last year's then unprecedented $1.41trn gap. The deficit would remain above $1trn in 2011 although the president proposed to institute a three-year budget freeze on a variety of programmes outside of the military and homeland security as well as increasing taxes on energy producers and families making more than $250,000.
The budget proposes to levy a fee on the country's biggest banks to raise an estimated $90 billion to recover losses from the government's $700bn financial rescue fund. Those losses are expected to come not from the bank bailouts but from the support extended to General Motors and Chrysler and insurance giant American International Group as well as help provided to homeowners struggling to avoid foreclosures.
Obama put forward a budget that included a $100bn jobs measure that would provide tax breaks to encourage businesses to boost hiring as well as increased government spending on infrastructure and energy projects. He called for fast congressional action to speed relief to millions left unemployed in the worst recession since the 1930s.
Republicans complained about Obama's proposed tax increases and said the huge projected deficits showed he had failed to get government spending under control. But administration officials argued that Obama inherited a deficit that was already topping $1trn when he took office and given the severity of the downturn, the president had to spend billions of dollars stabilising the financial system and jump-starting growth. Obama's job proposals would push government spending in 2010 to $3.72trn, up 5.7 per cent from last year. Obama's blueprint for the 2011 budget year, which begins October 1, would increase spending further to $3.83trn.
Much of the spending surge over the past two years reflects the cost of the $787bn economic stimulus measure that Congress passed in February 2009 to deal with the worst economic downturn since the Great Depression. The surge in the deficits reflects not only the increased spending but also a big drop in tax revenues.
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