Obama's Optimistic Economic Recovery Budget Plan

We have reported about Obama's Economic Recovery plan in the past. Here is a breakdown of what it entails.

Basically, he wants to start decreasing debt by spending more money. It goes without saying that many people have a problem with this theory. Congressional Republicans in particular have been tearing this plan to pieces claiming that spending money we don't have is not the way to help the economy recover.

First of all, the President has very optimistic hopes for the economy. In a proposed budget plan, he expects to cut $4 trillion out of the country's deficit over the next ten years. The deficit would fall to $901 billion in 2013 and then $575 billion by 2018. However, in order to achieve this lofty goal, the administration wants to raise spending on programs that will supposedly kick-start the recovery process. The main focus is to build a "solid foundation of educating, innovating, and building," according to the administration.

This involves the following spending:

• $476 billion for transportation projects such as inner-city rail services
• $30 billion to modernize some 35,000 schools
• $30 billion to help states hire more teachers, police, rescue workers and firefighters
• Potentially $8 billion more for businesses and community colleges to train more workers in high-growth industries

According to a poll taken, however, most people do not care about lowering the deficit. Americans are more concerned with job growth. The White House is actually predicting that job growth will remain weaker than normal for the next several years, but they are optimistic that unemployment rates will fall below 6 percent by 2017.

Additionally, the budget does not include anything regarding revising the tax code. It is widely acknowledged and accepted that fundamental tax reform is vital, but the President continues to side-step the issue by leaving it out of budget proposals. Despite this, with former President Bush's tax cuts expiring this year, President Obama may have a chance to oversee one of the biggest changes to the tax code in nearly a decade. He will be able to either raise taxes by doing nothing, or he could issue a veto to extend them.

Do you think it would be smart for the President to raise taxes to help balance his budget plan? What would this do regarding the deficit problem? Leave your thoughts below!

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Economy Impacting News from Around the World

Here on our own turf, President Obama is proposing a new "Seven Step" budget plan to Congress in hopes of cutting the country's deficit by $4 trillion over the next 10 years. He will do this by raising taxes and cutting expenditures. However, this plan is likely to cause a larger deficit first before it reduces it. The expectation is $1.33 trillion in 2012 and $1 trillion in 2013. This is mostly due to the government trying to pull the struggling economy out of the gutter, such as helping homeowners to refinance at lower rates across the board to clear up much of the underwater housing market. Here's to hoping this plan really will help the citizens and in turn reduce the deficit which is currently at a staggering $15 trillion.

Moving on to Greece. As you may know, its outraged citizens have been rioting and burning down buildings in protest to Greece's "Austerity Plans". The Greek Parliament is currently in the process of trying to receive a fresh bailout from these austerity measures. This move means that mortgage bonds will be trading lower. These plans are not yet set in stone, however. The Finance Ministers of the Eurozone will meet on Wednesday to discuss the approval of Greece's austerity plan. Greece is hoping to receive these bailout funds by the March 20th deadline, but it will not be a quick fix for all of their problems.

Lastly, we look at the Middle East. Iran is building up their nuclear capabilities against Israel. The countries are feuding and it is expected that Israel may make a pre-emptive strike on Iran because they do not appreciate Iran pointing their weapons in their direction. This affects oil prices. Now at $100 a barrel, this feud is partially to blame for that. If they go to war, who knows what may happen to the prices and how it will effect the rest of the world. It may even bring about some safe haven buying of US bonds.

The current of the Federal National Mortgage Association (FNMA) 3.5% Bonds are $103.41, + 3bp. Because of this, we do want to encourage that you exercise caution while floating.

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