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

The treasury management announced that the deficit from October 2008 to January 2009 amounted to $569 billion and this is more than six times compared to the imbalance during the year age period. In January alone, the deficit amounted to $83.8 billion, which was worse than what the economists predicted. It was something close to $78 billion. The administration had to rush a surplus of $17.8 billion last January 2008.

Recession has taken such a gruesome effect mainly because of the decline in the finances of the government that sliced into tax revenues, foreclosures, as well as huge amount 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.

The budget year is going to happen in a few months from now, and the deficit has already exceeded the projected amount causing a disparity of $454.8 billion which is the full-year record.

The Congressional Budget office predicts that the deficit will strike up to $1.2 trillion. This is excluding the cost of the economic stimulus plan pushed by the US president guiding the Congress to immediately approve to fight the housing foreclosure and economic recession. Some private economists are forecasting that the deficit will go up to $1.6 trillion.

The Treasury secretary unveiled a revamp of the bailout plan, delineating changes on how the administration intends to utilize the second $350 billion. These initiatives would bind the bail out funds to assets at the private sector and the Federal Reserve to amplify lending initiatives by as much as $2 trillion. The administration is also planning to utilize the $50 billion from the bailout fund to release new government initiatives to fight the recurring mortgage foreclosures. New strategies have been initiated by the Housing and Urban Development Department with the help of housing group representatives and top bank executives to restructure the new programs and combat foreclosures.

This entry was posted on Thursday, April 23rd, 2009 at 3:48 pm and is filed under Foreclosures, Recession. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.