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President Barack Obama has sent Congress a $3.83 trillion budget that would pour more money into the fight against unemployment and try to reduce a projected record deficit this year. The plan would boost taxes on the wealthy and freeze spending for a wide swath of government programs. The deficit for this year would surge to a record-breaking $1.56 trillion, topping last year’s then unprecedented $1.41 trillion gap. The deficit would remain above $1 trillion in 2011. Obama proposes a three-year budget freeze on a variety of programs outside of the military and homeland security as well as increasing taxes on energy producers and families making more than $250,000. Echoing the pledge in his State of the Union address, Obama proposed a $100 billion jobs measure that would provide tax breaks to encourage businesses to boost hiring. He would also increase government spending on infrastructure and energy projects.
The budget proposal could affect NASA. It could mean the cancellation of the Constellation mission to the moon, even with an overall increase in the NASA budget. But it calls for long-term research to prepare for an eventual mission to Mars. The proposal also calls for an end to tax breaks for energy exploration. The Texas Alliance of Energy Producers says that could cost Texas $50 billion over the next ten years and hurt small, independent producers, perhaps costing as many as 71,000 jobs. But the budget proposal calls for an increase in research spending, which could benefit Houston’s medical research facilities.
The Treasury Department says it expects to borrow $392 billion in the current quarter to finance the largest annual budget deficit in history. The projection is $86 billion lower than the estimate the department issued in November, when it expected to borrow $478 billion. The improvement is largely due to higher-than-expected repayments of about $90 billion in bailout funds by large banks. The department also says it borrowed $260 billion in last year’s fourth quarter, below an earlier estimate of $276 billion. Treasury expects to borrow $268 billion in the second quarter of this year. The projections come the same day that President Barack Obama issued a $3.83 trillion budget that forecast a record $1.56 trillion deficit, an increase from the $1.42 trillion deficit in the 2009 budget year.
The Obama administration is predicting little improvement in the nation’s unemployment rate by the end of the year. Although President Obama says the multitrillion-dollar spending plan is designed to get Americans back to work, the administration forecasts 9.8 percent unemployment at the end of this year. That would be down only slightly from the current rate of ten percent. Those predictions are in line forecasts from independent economists. The administration is predicting 8.9 percent unemployment at the end of 2011, and 7.9 unemployment percent by the end of 2012.
Positive economic news surrounds the nation’s manufacturing sector. The Institute for Supply Management indicates that manufacturing activity grew for a sixth straight month in January, to its strongest point since 2004. Other data released suggests the recovery lacks strength. Construction spending dropped sharply in December to its lowest level in more than six years. And gains in personal income and spending were too modest in December to signal that consumers can fuel a strong rebound. The Institute for Supply Management’s manufacturing index rose to 58.4 in January. That’s compared with 54.9 in December.
Toyota says its dealers should get parts to fix a sticky gas pedal problem by the end of this week. The automaker is apologizing to customers, trying to bring an end to a recall that has affected more than four million vehicles worldwide. The company said in a statement that it has begun shipping parts and is training dealers on the repairs. Some dealers will stay open around the clock to fix the 2.3 million cars and trucks affected by the recall in the U.S. Toyota tells dealers that technical bulletins on how to install the new parts should arrive at dealers by midweek. It was not clear exactly when repairs would start, although dealers have said they’ll begin as soon as possible. The automaker also said it will suspend production of eight U.S. models affected by the recall this week, with factories restarting on February 8th. Toyota suspended sales of the models last week, but a spokesman said dealers can begin selling the cars as soon they are fixed.
White House spokesman Robert Gibbs says President Barack Obama’s push to create jobs may carry a price tag in the $100 billion range. Gibbs says the idea is to help fill in the hole from jobs lost in the deepest recession to hit the country in decades. In his State of the Union address last week, Obama called for a program costing about $30 billion in incentives to employers to hire workers. The plan would include tax breaks to small businesses that increase their work force. Gibbs did not say in an interview Sunday with CNN’s State of the Union how the $100 billion figure would be broken down. That total includes money set aside for public works projects.
An economic formula is revealing what will likely be a difficult 2010 for the nation’s jobless. Analysts say in order for the unemployment rate to drop just one point to a still high nine percent, growth would have to be equal to five percent for all of 2010. And despite last quarter’s 5.7 percent gross domestic product growth, most analysts expect economic activity will slow to 2.5 percent or three percent for the first three months of this year. That’s why the Federal Reserve and other economists think the jobless rate won’t be down to a more normal five or six percent until the middle of the decade. High unemployment leads consumers to spend less, which keeps economic growth weak and could even send the U.S. back into recession.
Former Treasury Secretary Henry Paulson says the country would have suffered great depression-era joblessness–near 25 percent–if the government hadn’t arranged the financial system bailout. Paulson defended the Troubled Assets Relief Program, in an interview Monday on ABC’s Good Morning America. He said that he and other top policymakers had no choice but to intervene when they did. Paulson said the economy is recovering but that “it’s got a good ways to go.” And he said “we have not fixed the problems we need to fix.” Paulson also defended the bailout of the giant insurance company American International Group, saying it would have been a “disaster” if it had been allowed to fail.
President Barack Obama’s top economic adviser says the U.S. is experiencing an economic recovery on paper but a “human recession” because of job losses. Lawrence Summers, director of the White House National Economic Council, told a panel at the World Economic Forum in Davos on Saturday that the latest figures showing strong U.S. economic growth suggest Obama’s policies to prevent economic collapse are working. But the level of unemployment in the U.S. is disturbing, with one in five men between the ages of 25-54 not working. Summers says the U.S. and other economies are seeing “a statistical recovery and a human recession.”
The five-day forum in Switzerland saw spirited debate on whether more regulation is needed for the financial industry, how to boost sagging global unemployment, and how to keep the fragile recovery on course. But it wrapped up with no consensus on what’s going to spur job growth and prevent another global economic meltdown. In the keynote speech, French President Nicolas Sarkozy called for a return to ethics and morality in business. And he told international bankers and CEOs just what they didn’t want to hear: brace for bonus curbs, tighter banking regulations and new bookkeeping rules. On the sidelines of the forum Saturday, government regulators, finance ministers and central bankers from the U.S. and Europe laid out their financial reform plans during a two-hour meeting with bank executives. Their message to bankers also was that more regulation is on the way.
American Eagle is disputing nearly $2.5 million in penalties proposed by federal regulators related to on-board weight. The sister carrier of Fort Worth-based American Airlines has 30 days to respond to the Federal Aviation Administration. The FAA announced American Eagle allegedly did not make sure crews had accurate information about the weight of baggage on dozens of flights during 2008. American Eagle spokeswoman Andrea Huguely says the proposed penalties are “excessive and inappropriate.” She says most of the discrepancies cited by the FAA involved crews not recording the addition of late bags or valet bags. She says the information was accurate in the airline’s electronic system used for flight calculations. Huguely says the airline has spent $1 million on the system to track cargo weight and balance and is spending another $1.5 million to improve it.
Astros owner Drayton McLane says the group that was given a 30-day negotiating window to make an offer to purchase the club did not make an offer prior to the deadline. McLane says he’s not actively attempting to sell the franchise, but he has always been open to listening. He says he considers owning the Astros a public trust, and remains committed to putting a competitive and winning team on the field this year.
A lawsuit accuses the Texas Rangers and companies controlled by owner Tom Hicks of failing to pay $6.9 million for architectural and construction work. The lawsuit filed in state district court by RTKL Associates and Vratsinas Construction alleges that the firms are owed the money for work on a proposed development adjacent to Rangers ballpark in Arlington, as well as on the stadium itself. It charges the Rangers and other Hicks-related entities with breach of contract, unjust enrichment, fraudulent misrepresentation and fraudulent transfer. Neither Hicks nor his spokeswoman immediately responded to a request for comment. Rangers officials said they would have no comment. Hicks Sports Group has agreed to sell the team to a group headed by Pittsburgh attorney Chuck Greenberg.
A new Federal Reserve survey says most banks aren’t erecting new hurdles for people and businesses to get loans. The Fed says commercial banks generally ceased tightening standards on many loan types. The one exception: commercial real-estate loans. Even though banks aren’t imposing new restrictions on most loans, they aren’t ready to ease the tough loan standards put in place during the financial crisis. The Fed says banks have yet to unwind the considerable tightening that has occurred over the past two years. Meanwhile, demand for home mortgages and other consumer loans weakened, a sign consumers are leery of making big-ticket purchases given the fragile economic recovery.
The main militant group in Nigeria’s oil-rich Niger delta says they were not involved in the rupture of an important Royal Dutch Shell pipeline. The Movement for the Emancipation of the Niger Delta issued a statement saying they did not attack the Trans-Ramos pipeline run by Shell’s Nigerian subsidiary. The group said Saturday they would resume attacks against oil installations in the delta, abandoning an October 25th cease-fire agreement with the government. Shell said the ruptured pipeline was sabotaged Saturday in Bayelsa state. The company shut down three flow stations after the pipeline ruptured, though crude oil did escape. The company gave no timeline for fixing the pipe and restarting the flow of oil.
Several economic reports are due this week. The Labor Department will release its jobs report for January on Friday. The Commerce Department will release a report on factory orders for December on Thursday. The major automakers will report on U.S. sales for January on Tuesday. And, the index on pending home sales also comes out. Beleaguered automaker Toyota will release its earnings report on Thursday. Toyota recently issued a recall for about 4.2 million vehicles in the U.S., Europe and China.
Earnings
ExxonMobil says its fourth-quarter earnings tumbled 23 percent as higher oil prices squeezed profit margins in its refining business. The world’s largest publicly traded oil company reported earnings of $6.05 billion for the final three months of 2009. That compares with $7.82 billion a year earlier. The result marks five straight quarters of lower profits for Exxon. For the full year, ExxonMobil earned $19.3 billion. That compares with a record-breaking year in 2008, when Exxon had the highest profit ever for a U.S. company with earnings of $45.2 billion.
Anadarko Petroleum says fourth-quarter profit fell because of lower oil and gas prices and diminished demand. But The Woodlands-based exploration and production company said its full-year sales volume rose seven percent, despite a 35 percent drop in spending on near-term projects. Anadarko’s fourth-quarter net income totaled $229 million. Revenue fell to $2.41 billion from $2.93 billion in the year-ago quarter. A year ago, Anadarko reported profit of $786 million. Revenue totaled $3.8 billion.