February 1, 2010 / 12:37 PM / in 9 years

Analysts View: 2010 budget deficit to hit record

NEW YORK/LONDON (Reuters) - Following are analysts’ comments after U.S. President Barack Obama on Monday projected in his budget for the fiscal year to September 30, 2011 the U.S. budget deficit would soar to a fresh record of $1.56 trillion in 2010.

LATEST COMMENTS

NANCY VANDEN HOUTEN, ECONOMIST, STONE & MCCARTHY, PRINCETON, NEW JERSEY:

“It’s very much a political document that contains the administration’s agenda.

“These proposals would have many hurdles to clear, but that doesn’t mean that we’re not going to see a large deficit.

“Anything between $1.3 trillion to $1.6 trillion wouldn’t surprise me (because) tax receipts are still quite weak and costs aren’t going down.

“The spending freeze does little to solve longer term problems but is something.

“It might be difficult for Republicans to try to extend tax cuts in this environment.”

ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS, NEW YORK:

“The President is very confused. He wants to speak about austerity but there is this budget bulge. I’m very skeptical.

“A lot of what he’s doing is confusing. He’s back on his heels. The Democrats feel the pressure from the Republicans after the recent elections. They have to find something to do that’s positive so people will vote for them.”

ANDRE BAKHOS, PRESIDENT, PRINCETON FINANCIAL GROUP, NORTH BRUNSWICK, NEW JERSEY

“We’re talking about a record budget with record deficits. In it we have I believe $100 billion stimulus on top of what’s already been approved in the past, and it’s going to be interesting to see how that plays up.

“I don’t believe it’s going to make a (stock) market impact. People are aware of the deficit and the record budget. I don’t think the average investor will trade on the back of that.”

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK & CO., NEW YORK:

“I don’t think there is anything out there that is job creating and I don’t have much confidence that some of the spending cuts will actually happen.

“I would rather come in today and focus on fundamental earnings rather than what the government’s budget deficit is going to be. It’s going to be large, it’s going to be big and that’s what’s the most disappointing thing and this doesn’t change that.”

MARC OSTWALD, CURRENCY, RATES STRATEGIST, MONUMENT SECURITIES, LONDON:

“When the deficit is that size and you want to cut it meaningfully, you have to do more.

“It is still tinkering around the edges. One has to look at more meaningful things in terms of what will actually reduce the deficit, (which is) the revenue picture.

“This is really something that is going to have an impact on equities, rather than the dollar or Treasuries because it’s individual areas (such as aerospace) what may be impacted.”

EARLIER COMMENTS

SIMON DERRICK, CURRENCY STRATEGIST, BANK OF NEW YORK MELLON, LONDON

“A projected budget deficit of around one and a half trillion was around what was expected, maybe a little higher, but the market is not reacting to this. In terms of the dollar reaction, given risk aversion is on the table anyway, this counteracts what Obama is saying because risk aversion makes ownership of U.S. government paper more attractive.”

KORNELIUS PURPS, STRATEGIST, UNICREDIT MIB, MUNICH

“The problem of how we’re going to deal with these huge deficits, not only in Greece but in the UK, Germany, this question is unsolved and today’s (U.S.) budget figures are just another confirmation that it’s probably a huge problem. The bond markets have little choice when it comes to investing in triple-A securities like U.S. or German Bunds because other countries are probably faring even worse than these triple-A rated countries, so I wouldn’t expect a particularly negative bond market reaction.”

PETER DIXON, ECONOMIST, COMMERZBANK, LONDON

“Probably the spending cuts are not really sufficient to generate the kind of savings required to get the U.S. fiscal balance back in order anytime soon. It looks like we are going to have a situation in which the U.S. budget deficit and consequently the amount of debt will be an issue.”

NICK STAMENKOVIC, RIA CAPITAL MARKETS

“This is just a confirmation of what he said in the State of the Union address last week and it shouldn’t come as much of a surprise to markets.”

DAVID PAGE, ECONOMIST, INVESTEC

“The U.S. budget deficit is only projected to be curtailed back to 3.9 percent by five-years time, whereas in the UK we’re hoping to see a sharper curtailment.

“So the plans include aggressive deficit reduction but not as aggressive as in European nations.”

KENNETH BROUX, MARKET ECONOMIST, LLOYDS TSB, LONDON

“It looks to me like they are bumping up the deficit forecasts very near term so frontloading the spending just to stabilize the labor market. That’s what they want to concentrate on going into the Congressional elections in November. Raising spending near term, get the deficit up but bring it down after that. If they will bring it down below 10 percent next year it will be some unqualified success.”

DAVID BUIK, PARTNER, BGC PARTNERS, LONDON

“They have chosen the path of glory which is to spend their way out of trouble and this just endorses it. The taxpayers will pay for this and I think it will damage growth very badly.”

Compiled by London and New York markets teams

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