US deficit US$1.58 trillion this year

The deficit this year is three times that of last year

WASHINGTON: The White House plans to announce the federal deficit is about $262 billion less than officials predicted early this year, in part because the Obama administration has provided less aid than expected to Wall Street.

The deficit still will be three times bigger than last year's.

The federal deficit this year will total $1.58 trillion, a senior White House official said late Wednesday.

The official spoke on condition of anonymity to discuss the report before its release Tuesday when President Barack Obama will be on vacation in Massachusetts.

The nonpartisan Congressional Budget Office is expected to release its midsession review the same day.

It estimated in June that it expected a deficit of $1.825 trillion.

The report for the budget year that ends Sept. 30 also would predict Washington to spend $3.653 trillion this year, the official said.

Revenue, however, would reach only $2.074 trillion.

The new deficit numbers are record-shattering, but would give the administration the opportunity to say that its policies have avoided a more extreme financial crisis and eliminated the need for further bank infusions.

Still, the deficit amount is a tremendous obstacle for an administration trying to undertake massive policy overhauls in health care and the environment.

"Whether it's $1.6 trillion or $1.8 trillion, it's pretty bad," said Robert Bixby, executive director of the bipartisan fiscal watchdog The Concord Coalition.

"I hope no one tries to spin that as good news."

But Stan Collender, a former congressional budget staffer, said the White House's new deficit numbers cannot be blamed on Obama.

Collender, now with Qorvis Communications, a Washington consulting firm, noted that the deficit estimate when President George W. Bush left office was $1.2 trillion and that did not include a tax adjustment and additional spending for operations in Iraq and Afghanistan, approved this year, that Bush also would have sought.

The midsummer report was supposed to have been released by mid-July but was delayed, which led to speculation the White House was delaying the bad news until Congress left on its August recess.

Other administrations delayed releasing similar reports during their first year in office.

Obama's budget had included a $250 billion placeholder for a second bailout of the nation's troubled banks but did not ask Congress for it because of the fear that the administration was spending too heavily.

The administration also had anticipated failures of more banks, but the survival of most banks saved billions for Washington.

The report comes during a rough patch for Obama's presidency.

The rancor surrounding the Democrats' proposed health care overhaul also provides a distraction during a monthlong break when much of Washington is in a lull.

The administration predicted this year that unemployment would peak at about 9 percent without a big stimulus package and 8 percent with one.

Congress passed a $787 billion two-year stimulus measure, yet unemployment soared to 9.4 percent in July and appears headed for double digits.

The nation's debt, the total of accumulated annual budget deficits, now stands at $11.7 trillion.

In the scheme of things, that is more important than talking about the "deficit," which only looks at a one-year slice of bookkeeping and ignores previous indebtedness that is still outstanding.

Even so, the administration has projected that the annual deficit for the current budget year will hit the $1.58 trillion figure, more than three times the size of last year's deficit of $455 billion.

Economists predict that an improved economic climate could help reduce the deficit in the 2010 fiscal year to $1.3 trillion.

Obama has promised to reduce the budget to $533 billion in the 2013 fiscal year.

"The deficit is obviously very large and a problem," said economist Mark Zandi of Moody's Economy.com.

"But it's not quite as bad as what expectations were a few months ago."

Earlier this year, Zandi, whose observations are frequently cited by administration and congressional officials, had predicted that the administration would have to get congressional approval for additional rescue funds for financial institutions.

"It's working out better than I anticipated," he said.

Source : STAR
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Billionaire Buffet urges US to stop 'printing' money and halt debt rise

Now that the worst of the economic crisis is past and recovery is slowly under way, Congress must halt the mounting increase in U.S. debt to avoid damage to long-term growth and destruction of the dollar, Warren Buffett is urging.

The plainspoken billionaire weighed in with his view in an Op-Ed piece published in The New York Times Wednesday, saying that once recovery is solidified, lawmakers need to exercise "extraordinary political will" and slow the printing of money to finance the spike in debt.

That huge spending for financial bailout and economic stimulus was sorely needed to rescue the economy in its greatest peril since the 1930s, Buffett said, but now "unchecked emissions" of dollars "will certainly cause the purchasing power of currency to melt" the way runaway carbon emissions will likely melt icebergs.

With government spending now nearly double what it is taking in, "truly major changes in both taxes and outlays will be required," Buffett wrote.

"A revived economy can't come close to bridging that sort of gap."

Buffett, one of the world's wealthiest men, enjoys opining on issues of the day.

And as the "Oracle of Omaha" and head of a successful investment firm, his views carry weight in the public arena.

He has gained a sharper political profile in recent years and has spoken out, for example, on the obligation of the privileged to help the poor.

Buffett was a top economic adviser to Republican Arnold Schwarzenegger's first campaign for California governor and advised Democrat John Kerry's presidential campaign in 2004.

Last September at the height of the financial turmoil, Buffett's firm, Berkshire Hathway Inc., rushed in with a $5 billion in investment in Wall Street powerhouse Goldman Sachs Group Inc., a move viewed as a vote of confidence for a survivor of a crisis that felled two of its investment banking peers.

The economy "is now out of the emergency room and appears to be on a slow path to recovery," Buffett wrote in the Op-Ed.

"But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself."

Because of the deficit, the amount of U.S. debt that is publicly held likely will rise to around 56 percent of Gross Domestic Product this fiscal year ending Oct. 1, from 41 percent last year, Buffett noted.

The three ways of financing the rising debt - borrowing from other countries, borrowing from Americans or printing money - all carry problems, he said.

"The United States is spewing a potentially damaging substance into our economy - greenback emissions," Buffett wrote.

Source : STAR
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Numbers of poor in US projected to increase to 38.8mil

The numbers of poor and uninsured Americans are likely rising - with more than 38.8 million believed to be in poverty.

Rebecca Blank, the Commerce Department's undersecretary of economic affairs, spoke to The Associated Press in advance of next month's closely watched release of 2008 census data.

Noting the figures are not yet final, Blank said the numbers will likely show a "statistically significant" increase in the poverty rate, to at least 12.7 percent.

That would represent a jump of more than 1.5 million poor people last year.

"There's no question that 2008 economically was a much worse year than 2007," she said Wednesday.

"The question is how much and how bad."

The number of Americans without medical insurance is also expected to notably increase due largely to rising unemployment and the erosion of private coverage paid for by employers and individuals, but Blank declined to say by how much.

In 2007, the number of uninsured fell by more than 1 million mostly because government programs such as Medicaid for the poor picked up the slack.

The census figures, set to be released Sept. 10, could have important ramifications as Congress returns from its August recess to debate health reform, its cost, and the ways to pay for it.

Republicans also have traditionally pointed to the intractable poverty rate as a sign that government programs do not work, a claim likely to be repeated often in light of the federal economic stimulus package.

In a 30-minute interview, Blank said the census figures released next month could possibly understate the actual number of poor people, since the poverty rate is a lagging indicator that tends to accelerate over time.

As a result, the 2008 data could prove to be the tip of the iceberg, with more significant declines reflected in 2009 figures released next year.

Blank, a former co-director of the National Poverty Center at the University of Michigan, estimated this year that poverty could eventually hit 14.8 percent or more in the United States should unemployment reach 10 percent as some analysts have predicted.

That would be almost one of every seven Americans.

Based on 2007 figures, the poverty rate currently stands at 12.5 percent, or 37.3 million, largely unchanged from recent years.

The official poverty level is now $21,203 for a family of four, $13,540 for a family of two, based on a calculation that includes only cash income before deductions for taxes.

It excludes capital gains and it does not take into account accumulated wealth or assets, such as a home.

On Wednesday, Blank said she was working with the Census Bureau to provide better measures of poverty.

Such alternative measures, which will be released sometime after Sept. 10, will seek to better incorporate added costs of health care, child care, housing and transportation, but also noncash income from the stimulus and other government programs, such as tax credits and food stamps.

Source : STAR
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Layoffs rise first time in 6 months; 97,000 job cuts in July

Job cuts announced by US employers jumped 31 per cent in July to over 97,000, increasing for the first time in six months, warning of a further hike in downsizing activity by the last quarter of the year, a report said today.

After falling to a 15-month low in June planned job cuts announced by US employers jumped to 97,373 in July. It was the first increase in monthly job cuts since January, global outplacement consultancy Challenger, Gray & Christmas Inc said here in its latest report.

"After June's surprisingly low job-cut total, a July rebound was not entirely unexpected. While there are signs that the economy is stabilising and the pace of layoffs slowing, we are still a long way from a full recovery. In fact, monthly job cuts are likely to return to levels in excess of 100,000 by the fourth quarter," Challenger, Gray & Christmas CEO John Challenger said.

Job cuts had fallen 33 per cent in June to 74,393, the lowest monthly total since March 2008. The July total was 6 per cent lower than the same month a year ago, when employers announced 1,03,312 cuts. So far this year, employers have announced 9,94,048 job cuts, 72 per cent more than 5,79,260 layoffs through the first seven months of 2008.

The July surge in job cuts was led by firms in the transportation industry, which announced plans to reduce payrolls by 27,954 positions, a five-fold increase from the June layoff total of 5,587.

The telecommunications sector also experienced an increase in layoffs last month with job cuts surging to 17,601 in July from 802 in June.

Meanwhile, the automotive sector, which leads all other industries in year-to-date job cuts with 1,22,212 layoffs has seen layoff announcements decline in each of the last three months. These companies announced 2,716 job cuts in July.

"Declining layoffs in the automotive industry may not be indicative of a turnaround. Instead, these employers simply may not have any room for additional job cuts if they hope to build new fleets of more eco-friendly cars," Challenger added.

With consumer and business spending at a standstill transportation companies have little choice but to make further cutbacks in staffing, it said, adding, that a surge in hiring could take place around the holidays.

Other sectors which saw downsizing during July are government/non-profit (7,131), industrial goods (6,548) and financial (5,030). While economic conditions and cost-cutting claimed over 58,000 jobs, voluntary severance led to 15,070 job cuts in July.

Employers also announced plans to hire a total of 17,183 employees with retail (14,200) and aerospace/defence (1,160) leading the pack.

Source : Business Standard
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Lockheed Martin to Cut 800 Space Systems Jobs

Lockheed Martin, the world's largest defense contractor, said it plans to cut about 800 jobs at its space systems division by the end of the year, as it anticipates flat budgets for space programs at NASA and the Pentagon in the coming decade.

"We looked at the budget forecasts and new program starts looking at three to five years in the future and realized we need to be appropriately sized," said Charles Manor, a Lockheed spokesman. "We need to get a bit smaller" he said, because the company expects few new programs starting with the Defense Department and NASA.

"It is a very unfortunate step, but it is necessary," he said. "It is clear that DOD's space modernization effort has reached its apex. Things will be relatively flat for the foreseeable future."

Manor said the Bethesda-based company would offer a voluntary buyout plan this month to its space systems employees. The cuts will include technical, managerial and administrative positions at facilities in Denver and Sunnyvale, Calif. The reductions represent about 4.5 percent of Lockheed's roughly 140,000-person workforce.

"NASA and DOD's budgets for space are not going to grow by leaps and bounds," said Marco A. Caceres, a senior analyst and director of space studies at the Teal Group, a Fairfax industry consultant. "There's a dose of reality that's going to set in because of the economic situation."

The job cuts announced Monday come as Lockheed is also downsizing its operation in Louisiana where it makes rocket fuel tanks for the space shuttle. The shuttle is scheduled to make its last flight in 2010. Lockheed has had other job reductions in Owego, N.Y., where it makes the new presidential helicopters. A multibillion-dollar contract on the helicopters was recently canceled.

Source : Washington Post
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Samsung files notice of 550 job cuts

Samsung Austin Semiconductor plans to cut 550 jobs from its Northeast Austin manufacturing operations starting on or about Oct. 18, according to a notice submitted by the company to the Texas Workforce Commission Tuesday.

The company did not immediately provide a list of job categories affected.

Samsung has said that many of the job cuts would affect equipment operators at Fab 1, which will be shut down on or about Oct. 18. But spokesman Bill Cryer acknowledged that other job classifications, including engineers and technicians also will be affected.

Samsung informed workers of the impending shutdown of Fab 1 last Friday. The company expects to spend $500 million renovating and re-equipping the older chip factory to become a part of the newer Fab 2, which is inext door to Fab 1.

Fab 1 began producing chips in 1997. Fab 2, which is much larger and far more automated, started production in 2007.

Fab 2 makes flash memory chips used in smart phones, portable media players and other consumer devices.

When the renovation is complete, Samsung said it expects to hire 150 to 200 workers next year to work in the expanded Fab 2.

Source : Statesman
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

After nine decades of short stories, Reader's Digest turns to Chapter 11

Reader's Digest Association, the venerable staple of doctors' waiting rooms and middle-class bedside tables, yesterday announced plans for voluntary bankruptcy as it became the latest victim of the advertising recession.

Equity investors, led by Ripplewood Holdings, who announced the $2.4bn acquisition in November 2006, will lose their entire $600m investment.

The pre-packaged Chapter 11 filing, agreed with senior lenders but contingent on agreement with other lenders, marks the latest media industry deal struck at the peak of the credit-fuelled buy-out market to head towards the bankruptcy courts.

Reader's Digest, launched by a husband and wife in New York in 1921 from one room under a Greenwich Village speakeasy, began as a mail-order collection of condensed articles from other magazines and evolved into a direct-mail pioneer and one of the world's largest publishers.

Nine of its 94 magazines have a circulation of more than 1m in the US alone, and its titles claim a combined global readership of 130m people in 78 countries.

But the group has been hit hard by changing reading habits and an advertising recession.

Advertising revenue from the flagship magazine fell 18.4 per cent last year, and is down another 7.2 per cent in the first six months of this year, according to the Publishers Information Bureau .

"The deal was done at the height of the frothy investment banking model, and the company was saddled with $2.2bn worth of debt," said Tom Williams, chief financial officer. Group revenues are down just 2 per cent this year, said Mary Berner, chief executive.

However, as cash flows came in below the Ripplewood-led buy-out group's expectations, it found itself struggling to make a $27m interest payment, due yesterday.

Ms Berner said the restructuring would not affect its operations or suppliers. "This is a balance sheet issue and not an operational issue," she said.

Source : Financial Times
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]