According to an article in the Star-Telegram, the Obama Administration’s new budget may be painting an unrealistically “rosy” picture instead of showing the true costs of government programs and proposed tax cuts. While the administration predicts that the deficit will decline to $1.17 trillion and that the overall economy will grow by 3.2 percent in 2010, and 4 percent in 2011, many analysts predict that the economy will only grow by 2.1 percent in 2010 and 2.9 percent in 2011, absorbing much less of the costs associated with the new programs and tax cuts than predicted.
The article said:
“When a country is griped by a financial crisis, the ensuing downturn often lasts much longer than normal,” said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University. “I think this downturn is gong to last longer and the rebound will be fairly anemic.”
Sohn may be right. With the high level of job losses, foreclosures and bankruptcies (personal and corporate) overall growth has slowed to a trickle. And if most analysts in various sectors are correct we haven’t seen the worse of it yet. Even as we speak more companies file for bankruptcy causing massive job losses and eventually foreclosures as the unemployed exhaust their cash. And because there are so many unemployed Americans desperately seeking work those job loss numbers are not likely to decline as soon as 2010.
Less workers equals less consumers, which means less revenue for businesses and companies will little revenue experience job losses, store closings and even bankruptcy. These factors contribute to the economy shrinking or growing much slower than usual. Although the economy will eventually recover, it is unlikely to recover at the rate we all hope for. What is imperative now is that we take measures to stop the loss of wealth amongst Americans because of job losses and foreclosure. If the new administration hopes to get even close to their projected growth rate, they need to take action to protect workers and homeowners especially from the foreclosure fallout hitting communities nationwide.