Saturday, July 24, 2010

Random quote

"The economy now is markedly different from what it was at the beginning of the President’s term, 18 months ago. In January of 2009, the economy was on the brink of a potentially severe depression, precipitated by an era of irresponsibility marked by excessive risk-taking in, lax oversight of, and an eventual meltdown in the country’s credit and capital markets. The result was a severe and rapid economic contraction, the collapse of the financial markets, and damaging and painful job losses. More than 750,000 jobs were lost just in the first month of 2009, 3.7 million were lost in the first half of that year, and 8.4 million were lost between the beginning of the recession, at the end of 2007, and the beginning of the recovery.

At its start, then, the Administration faced a gap between what the economy could be producing and what it was producing: a difference of $1 trillion or approximately 7 percent of gross domestic product (GDP). In addition, the country faced historic budget deficits and an unsustainable fiscal trajectory. No longer was the Nation expecting to enjoy the surpluses projected at the beginning of the last decade. Instead, upon taking office, the President was presented with a budget deficit for 2009 estimated to be $1.3 trillion, or 9.2 percent of GDP. The previous Administration’s decisions not to pay for three large domestic initiatives (the tax cuts of 2001 and 2003 and the Medicare prescription drug benefit of 2003), along with the effects of the economic collapse and the steps needed to combat it, produced an historically large ten-year deficit of more than $8 trillion. Even this large amount did not account for the depth or duration of the recession, and the ten-year deficit projections grew by an additional $2 trillion as the severity of the downturn became fully apparent.

The Administration moved swiftly to prevent the economy from falling into a second Great Depression. To stimulate demand and jumpstart economic growth, the President signed into law the American Recovery and Reinvestment Act of 2009. The Recovery Act provided tax cuts to small businesses and 95 percent of working families and helped to lay a new foundation for long-term economic growth and prosperity with investments in health care, education, infrastructure, and clean energy. The Recovery Act has had a demonstrable and significant effect on the economy, raising real GDP as of the second quarter of 2010 by an estimated 2.7 to 3.2 percent relative to what it otherwise would have been, and increasing employment by an estimated 2.5 to 3.6 million. The Nation’s economy has grown for three consecutive quarters and created nearly 600,000 private sector jobs in the first half of this year—a stark contrast to the 3.7 million lost over the first half of last year. In fact, after 22 straight months of job loss, the economy has created jobs in the private sector for six months in a row. In addition, other economic indicators are showing signs of improvement. Industrial production (which primarily reflects manufacturing), real disposable income, shipments of capital goods, and U.S. exports have all improved.

Despite these hopeful signs, the economy is still struggling; too many Americans are still out of work; and the Nation’s long-term fiscal trajectory is unsustainable, threatening future prosperity. Building on the steps the Administration and the Congress have already taken, the Administration’s proposals, reflected in the Mid-Session Review (MSR), seek to speed the recovery, keep the economy growing, and put the country on more sound fiscal footing."

Source: Mid-Session Review, Budget of the U.S. Government: Fiscal Year 2011

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