US deficit estimate slashed to $1.58 trillion

Updated on : Thursday, August 20, 2009

WASHINGTON: The Obama administration in the US will trim its budget deficit forecast for fiscal 2009 to $1.58 trillion, after scrapping money earmarked for bailing out more banks, officials said yesterday.

The record deficit has made investors anxious and threatens to thwart Obama's ambitious domestic agenda to overhaul healthcare, reform education and make the country less reliant on fossil fuels.

A government administration official said the drop in the projected deficit was due to the elimination of $250 billion that had been set aside for further possible financial rescues.

The new estimate involves a calculated judgment that financial markets have sufficiently stabilised and the administration will not have to go back to the US Congress to ask for additional money to bail out more banks.

US President Barack Obama says there are signs the economy is returning to normal and that his $787 billion stimulus programme is working, although any recovery has a long way to go.

Officials said the government's budget office would announce next week that deficit this fiscal year would total $1.58 trillion, about $262 billion lower than the deficit forecast in May.

Another $78 billion set aside for the Federal Deposit Insurance Corp to pay for bank failures will also be saved because fewer than expected banks went under.

Congress last year granted $700 billion under the Troubled Asset Relief Program to protect the country's financial system from a global credit crisis.

The government officials said spending this fiscal year would total $3.653 trillion and revenues would be $2.074 trillion. The decline in the size of the deficit, from an estimate of $1.84 trillion in May, would peg it at 11.2% of US gross domestic product, the officials said.

Investors are worried that record budget deficits will need to be funded by issuing massive amounts of government bonds, which could drive up long-term interest rates and undermine a sustainable economic recovery.

Obama has vowed to halve the deficit by the end of his four-year term, but he says massive government spending is needed now to end the country's worst recession since the Great Depression of the 1930s.

The Effects of Economic Meltdown over Employment

Written by Syed Shahzad Alam : Updated on Sunday, April 19, 2009

The Global Economic Meltdown has foremost and direct reaction over private employment sector. Thousands of jobs are cut down from famous and established multinational companies as their production level dropped down to below 50% of total production capacities.
Before the crisis, unemployment factor already existed but after the crisis, that has deepened its roots in society and major budgetary cut down in different countries have been seen from social sectors and many more actions are expected to be introduced. Tax rates are increasing and facilities are dropping down.
In many Gulf States overseas employees have been discharged and are replaced by local employees. This is resulting to deepen the crisis in countries like Pakistan, India, Bangladesh, Srilanka, Philippines and Thailand etc.
In Western Countries, this unemployment is increasing dependency on social aids from government to unemployed person. Simultaneously skilled persons are willing to accept jobs below 1 & 2 level of their last job. This will not only increase frustration but will also lose the pool of talented and skilled workers.
In Pakistan, industries are closing down and particularly textile sector which was back bone of industry and a key participant in exports. For last one and half decades the sector has been severely neglected by government for unknown reasons but it could still be manageable if government pay some attention and provide some facilities demanded by textile sector. Textile Sector has been remained a major source of employment and if it has a revival it can further provide massive employment both in technical and service sectors.
In Pakistan, unfortunately technology based industry has been neglected and major proportion goes to service based industry resulting the less advantage in industry growth due to any new advancement in technology. If this situation is compared to other countries in the region i.e. India, Iran, China and Malaysia then it is the well-known fact that these countries gave equal importance to technology based industry development and service sectors enabling these countries to get benefits of advancement in technology and to move forward in producing hi-tech equipments and capturing newly emerging markets of electronics and micro technologies.
With comparison to other countries the nature of problem in Pakistan has a different shape because of lack of necessary infrastructure. Less production of electricity is badly affecting the minimum level of production in industries and moreover uncertain political condition and worse situation in eastern and western borders are also the main cause of weak economy.