AUSTERITY DRIVE

Obama’s budget aims to reduce deficit by $1.1 trillion 

  President Barack Obama’s multitrillion-dollar budget, to be sent to Congress on Tuesday, will project deficit reductions of $1.1 trillion over a decade, an official said.
    Two-thirds of the reductions in the budget for the year beginning October 1 would be achieved through cuts in domestic programmes, including airport, water and sewer grants, and publichealth and forestry programmes, the official said, confirming a story in Monday’s New York Times.
    The official spoke on condition of anonymity because the budget details haven’t been released. He said that by 2015, the budget deficit would decline to about 3% of the US economy, from an estimate of about 9.8% this year, according to the Congressional Budget Office. Trimming the budget deficit to 3% of the nation’s GDP is a level most economists deem sustainable.
    The $1.1 trillion reduction over a decade is measured against spending levels in fiscal 2010, the official said. Budget director Jacob Lew said that measure is being used because it’s the last year of full funding of government programmes. Congress hasn’t approved a budget for fiscal 2011, which is almost half over.
    Much of the plan for savings comes from plans for a five-year freeze in non-security domestic
spending that the Obama administration says would save about $400 billion during the next 10 years. Such spending accounted for about 14% of the budget in Obama’s last budget. Republicans, who control the House, spelt out plans on February 11 to cut about $100 billion in programmes from the current year’s budget.
    Over the past few weeks, the administration has announced or leaked plans for the fiscal 2012 budget that would: Impose a fiveyear freeze on domestic spending outside security for a projected savings of about $400 billion over a decade, increase spending on education and infrastructure by unspecified amounts, add $15.7 billion to build a nationwide wireless network for emergency workers and widen access to highspeed internet, seek cuts of $2.6 billion, or about 50%, in the Low-Income Home Energy Assistance Programme, grant relief to heavily indebted states by temporarily suspending interest payments they owe the federal government for borrowing money to cover the soaring cost of unemployment benefits. This would be accompanied by a moratorium of state tax increases paid by employers to help fund benefits. Adding to the above, there will also be a demand for $8 billion in fiscal 2012, and $53 billion over six years, for construction of high-speed rail. BLOOMBERG

Barack Obama 

 

 

Nitesh Ranjan

PGDM 2nd Sem