What Traders Should Be Aware of in the 2010 Federal Budget
How does the 2010 Federal Budget affect traders and investors? Historically speaking, many analysis believe that the stock market is a leading indicator of the U.S. economy by 3 to 6 months. While this is a general rule of thumb which has been debated by academia, it may pay for traders to be aware of how the new administration under Obama is addressing the economic crisis.
Here is an overview of his new budget through which you can begin to formulate your own conclusions:
On Thursday February 26th, the U.S. Federal Budget for 2010 was released. In a sea of 140 pages, there were over $600 billion going to defense and roughly another $600 billion going towards all other Departments and programs. This article will show you how to decipher the complex budget so you will better understand where your tax dollars are going and how it impacts the financial markets.
Understanding how the new tax initiatives affect individuals
Upper middle class and wealthy Americans (those making over $250k annually)
The expiration of Bush tax cuts + $338 billion in revenue Elimination of itemized deductions + $179 billion in revenue Raising capital gains tax + $179 billion in revenue
Over 10 years, this adds up to $636 billion in potential revenue. If your household makes over $250k a year, you will soon have less real income.
Understanding where the trillion-dollar budget is going is important. Below we’ve deciphered some of the major expenditures. For additional information and insights about Obama’s 2010 Federal Budget, please visit Online Forex Trading.
Overview
Department of Defense: $663.7 billion + $7.4 billion from the Recovery Act
The Department of Defense receives the lion’s share of the Federal Budget to be used internally and externally. $533.7 billion is requested for specific programs with another $50-100 billion earmarked should the Department of Defense need it. The budget will cover the draw down of U.S. troops from Iraq, the aid of struggling states like Pakistan and the funding of programs that help to monitor cyber, biological and nuclear threats. Overall, a large amount of funds are not detailed.
Major Budget Allocations for the Department of Defense
Military Operations
- Military Operations in Iraq and Afghanistan – $130 billion
- Money that currently has no allocation but is budgeted should the Department of Defense need it – $50 billion
Soldiers
- Pay for service members that will keep pace with or exceed private sector jobs – exact amount not provided
- Expansion of military retired pay and Veterans Disability Compensation to all retirees receiving disability retired pay – exact amount not provided
- Expansion on integrated mental health professionals with deployed unites – amount not provided
- Improved medical care and housing for Wounded, Ill and Injured Service members – amount not provided
- Quality of life improvements for American Soldiers, Sailors, Airmen and Marines include modernization of barracks – amount not provided
Department of Education: $46.7 billion + $81.1 billion from Recovery Act
Obama’s commitment to bettering the U.S. educational system can be seen through the $81.1 billion he dedicates to education in the Recovery Act as well as the $46.7 billion in the 2010 federal budget. He wants to strengthen public schools, reward effective teaching and expand opportunities for higher education.
Department of Education Budget Highlights
Innovative Solutions
- Expand access to high quality early childhood education – no monetary value given
- Funds education research – no monetary value given
- Increase funding for charter schools – no monetary value given
College Access and Completion
- Access and Completion Incentive Fund, which supports state efforts that help low-income students finish college – $2.5 billion over 5 years
- Increase maximum Pell Awards – $5,500 as new maximum
- American Opportunity Tax Credit made permanent – $2500 per credit
Department of Transportation: $72.5 billion + $48.1 billion from the Recovery Act
The Department of Transportation is to use their budget to improve safety and reduce congestion as well as provide a financially viable system for the government. These improvements should also lead to new jobs for Americans. The money under the authority of the DOT increases from $17 billion to $70 billion. Overall, very few details are given as to why and exactly where the money is going.
Major Expenditures
Modernize Traffic Control
- Improve rural access to the aviation system as demand for subsidized commercial airspace increases – $55 million
- Improve the efficiency, safety and capacity of air traffic control through the Next Generation Air Transportation System – $800 million
- Supports moving from ground-based radar surveillance to satellite surveillance – no amount provided
High-Speed Rail Networks
- Creation of a high speed rail network as an environmentally friendly alternative to flying or driving – $5 billion over 5 years
Department of Energy: $26.3 billion + $38.7 billion from the Recovery Act
Although Obama’s $26.3 billion budget allocation to the Department of Energy is far less than the $33.9 billion projected to be spent in 2009 it is still $2 billion over the prior 3 years. A percentage of the budget goes to the promotion of a clean energy agenda and the advancement of Carbon Capture Storage technology. Obama also focuses on improving the safety and disposal of nuclear energy.
Highlights of Department of Energy Plan
New Energy Infrastructure
- Provide additional funding to the Office of Electricity Delivery and Energy Reliability, which received $11 billion form the Recovery Act – no monetary value given for 2010 budget
Clean Air Technology
- Supports loan guarantees for renewable energy projects and carbon capture store projects – no monetary value given
- Along with $3.4 billion from the Recovery Act the 2010 budget supports the advancement of low-carbon coal technologies – no monetary value given
Increased Nuclear Security
- Supports efforts to secure and dispose of nuclear material – no monetary value given
- Supports efforts that will deter nuclear smuggling – no monetary value given
Department of Agriculture: $26 billion + $6.9 billion from Recovery Act
In addition to the $26 billion dollars allocated for the Department of Agriculture in the 2010 budget, it received an additional $6.9 billion in the Recovery Act.
Major Expenditures
Rural and Farm Economic Growth
- Five Rural Development Programs – $61,000,000
- Increase rural broadband – $1,300,000,000
- Increase national supply of home-grown renewable fuels – $250,000,000
- Rural teaching incentives and lands grants for minority-serving institutions – 70,000,000
U.S. Natural Resources
- Forest Protection – $50,000,000
- Wildfire Protection – $1,382,000,000
- Land conservation – $119,000,000
- Food Safety and Nutrition Assistance
Food Safety and Nutrition Assistance
- Child Nutrition Reauthorization – $1,000,000,000
There are many strong opinions on both sides as to how Obama’s plan helps or hinders the economic recovery. But if history repeats itself, the near-term performance of the U.S. Stock Market itself may give us the most reliable opinion of all.
For additional insight into President Obama’s 2010 Federal Budget, please visit Online Forex Trading.
Rebekah Manning uses her financial services background to turn complex economic topics into easily digestible information for all readers. Before joining Online Forex Trading, she spent her time studying the markets and trading foreign exchange. Outside of her work at OFT, Rebekah enjoys mixed martial arts and home decorating.