New Budget is Here!
Research for Online Investors

by John Dalt

2/14/11

The White House unveiled the President’s budget proposal for fiscal year 2012 this morning.  The budget proposal for $3.729 trillion dollars predicts a deficit of $1.645 trillion in 2011 with debt 72% of GDP.  The budget places a five year freeze on non-discretionary spending.  It includes $1.1 trillion in deficit reduction over the next ten years, but actually increases the deficit percentage in 2011. The 2012 budget cuts $33 billion across discretionary domestic spending programs.

Reuters gives an overview on the budget and the political fight that will take place in the future.  The president spoke at a school in Baltimore, Maryland this morning.  He described the budget as one of “tough choices and sacrifices.”  MSNBC points out that most of the projected cuts do not occur until after the end of his first term.  The President has tried to strike a populist tone on his budget that it will reduce spending as a percent of GDP to the lowest level since Dwight D. Eisenhower was President.

According to MSNBC, the budget resurrects some tax increases that were rejected by democrats last year.  The budget anticipates letting the Bush tax cuts expire in 2012, limiting itemized deductions for high income taxpayers, and increasing taxes on oil, natural gas, coal producers, investment managers and multinational corporations.

The House of Representatives is scheduled to debate budget matters tomorrow for the current year.  Last year's congress never passed a budget.  The country is operating on Continuing Resolutions.  The present Continuing Resolution expires in two and a half weeks.

Tea Party activists are hopeful for cuts in current year spending of $60 to $100 billion.  According to Politico, the continuing resolution will cut current year spending for foreign aid, education, defense, environmental protection and other areas.

The President’s budget increases spending on education, green energy, biomedical research and high-speed rail.  Senate Republican leader Mitch McConnell said, "Americans don't want a spending freeze at unsustainable levels, they want cuts, dramatic cuts."

The market is trading even today.  We get retail sales tomorrow to give the market some direction.  The afore mentioned house debate on a continuing resolution that begins tomorrow will provide some entertainment, and may change some investor’s attitudes about inflation and treasuries.

To the mailbag:
If Mubarak was forced out after 17 days of protests, does that mean Obama will leave if the tea party protests?---subscriber T.M.

John’s reply:  I was wondering the same thing, after all Mubarak was elected.  I don’t remember him calling for Obama to step down last summer.  A Greek Tragedy?

Don’t forget to mention the NFC Green Bay Packers won the Super Bowl.  When NFC wins, the market goes up!-paid up subscriber J.P.

John’ reply: Is that newsworthy?

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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