Deficit at Record High Due To Recession, Foreclosures and Bailout

By: Joseph Smith


The economic recession, foreclosure crisis and huge costs for the financial bailout have shoved the federal deficit to a record high of the budget year’s first four months.

According to the Treasury Department, the deficit from October to January amounted to $569 billion which is more than six times bigger compared to the imbalance during the year-ago period. The deficit for the month of January alone amounted to $83.8 billion, which was worse than the $78 billion that economists predicted. The administration had to rush a surplus of $17.8 billion last January 2008.

The massive decline in the finances of the government mirrors the recession that has sliced into tax revenues, foreclosures, as well as the huge amounts of money being used from the Congress’ $700 billion financial rescue plan passed last October. An estimated 75 percent of the increase in deficit was attributed to the spending on the bailout program.

With only eight months left in the present budget year, the deficit has already exceeded the deficit projected for 2008, a disparity of $454.8 billion which is the full-year record.

Moreover, the Congressional Budget Office predicts that the deficit for the present budget year will strike $1.2 trillion, excluding the costs of the economic stimulus plan pushed by President Barack Obama that Congress should immediately approve to fight the housing foreclosure and economic recession. Still, several private economists are anticipating that the budget deficit for this year will strike $1.6 trillion.

Timothy Geithner as the Treasury Secretary unveiled last Tuesday a revamp of the bailout plan, delineating changes on how the administration intends to utilize the second $350 billion. Those initiatives would bind the bailout funds to assets at the private sector and the Federal Reserve to amplify lending initiatives by as much as $2 trillion. The administration also plans to utilize the $50 billion from the bailout fund to release new government initiatives to fight the recurring mortgage foreclosures.

Last Wednesday, Geithner, together with Shaun Donovan as the new secretary of the Housing and Urban Development Department, convened with housing group representatives and top bank executives to discuss how the new programs should be restructured to combat foreclosures.

John Taylor of the National Community Reinvestment Coalition stated that he became confident with the proposals considered by the administration even though the details still remain unclear. He also believes that the Obama administration will approve to making use of government money to fight the foreclosure crisis by buying up mortgages, taking them away from complex mortgage-linked securities as well as reorganizing them at more reasonable amounts. The broad-based government and industry officials support is a big step compared to the resistance to such a method by the Bush administration.

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Joseph Smith has been educating buyers on the finer points of Florida Foreclosure Listings at TopForeclosureListings.com for over four years. Click here to visit and read more advice on finding Foreclosure Listings.

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