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Increased inflation

The economy is not doing well as businesses do not have enough money to finance their operations. This has led to many people being laid off so that businesses can sustain themselves while others have been shut down. In the efforts to revive some ‘big’ businesses, the state is giving them money to help them get back on their feet but one wonders whether this is making the situation better or worse. For instance, AIG; a giant insurance company, which has about $ 170 taxpayer’s money has been paid $ 220 for bail out. This is a lot of money being used to fund one business while the rest of the economy is ailing.

If they cannot get enough money through the TARP, one wonders how they are able fund another money collecting institution in stead of helping other areas of the economy. Congress therefore will have to limit the amount of money that the president would wish to consider for more bail outs because once given out there is no way that this money will be given back. Economist. com. Sound and fury over AIG, Mar 17th 2009 2. The Congressional Budget Office has forecasted that the country has a

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$1. 8 trillion budget deficit.

Although the CBO forecasts are not similar to those made by the Office of Management and Budget, still it is a cause for concern as they both reflect a budget deficit. A more balanced budget is required if things are to return the way they were. When more money was spent on social programmes in 1993 the country was in a deficit and a balanced budget back then worked. The Democrats should stop blaming the republicans for their unbalanced budget and instead work together so that they can find a solution to the crisis. Though it is said that the country can operate with a deficit, the Mr.

Obama’s team are looking for the proper operational point that will at least keep the country in the right direction. The OBM is doing a good job in forecasting the numbers and CBO ought to support them instead of looking for ways to criticize their efforts. Economist. com: The ever-bleaker budget, March 20th2009 3 The country’s GDP had dropped by 6% in the first quarter of 2008 and was termed the worst performance in 26 years. This fall has affected businesses, investment, and due to increased inflation. This will in turn necessitate the regulation of imports so as to prevent deficits in the balance of payments.

As much as the fiscal stimulus is being injected into the economy, its effect will not be seen after a while Industrial production is one sector that was badly hit and this explains the fall in exports. The domestic economy attributes part of its decline to the economic status in other countries who engage in trade with them. There has been small growth since January and therefore, policies will need to be enacted to facilitate this economic transition. US economy in worst shape since 1982 By Krishna Guha in Washington Published: January 29 2009

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