U.S. deficit soars to $485.2 billion

NEW YORK (CNNMoney.com) -- The federal budget deficit expanded by $83.6 billion in December, the Treasury Department reported Tuesday, bringing the total deficit for the first three months of the 2009 fiscal year to $485.2 billion.

By comparison, the budget deficit for all of fiscal year 2008 was $455 billion. In fiscal 2007, it was $161 billion.

The deficit has ballooned in the first quarter of the fiscal year as the Treasury, Federal Reserve and FDIC began spending record amounts of the $7.2 trillion committed so far to bailouts, financial stabilization efforts and capital investments. The numerous emergency actions began as a result of the credit crisis that started in mid-September.

A decline in tax receipts, stemming from the 1.5 million jobs lost in the first three months of the fiscal year, also contributed to the soaring deficit.

Treasury has collected $255.3 billion in individual income taxes so far this fiscal year, down 6.7% from $273.7 billion in the first quarter of last year.

Businesses contributed just $50.4 billion in taxes in the first three months of the year, 45.5% less than the $92.5 billion they paid Treasury at this point last year.

Budget experts have projected that the federal deficit for this fiscal year, which began Oct. 1, will be nearly $1.2 trillion. But that total doesn't count the economic recovery package that President-elect Barack Obama has started to push forward.

Economists and Obama advisers expect the government to commit at least $775 billion to stimulate economic activity. The effect on the budget deficit will likely be substantial, but less than the upfront cost, as infrastructure programs take time to implement.

Still, even noted deficit hawks have said that, given the enormous depth of the recession, policies that increase the deficit now are less of problematic than letting the economy deteriorate further.

The Treasury reported it committed another $51.1 billion to the Troubled Asset Relief Program in December, bringing the total outlays committed to the financial rescue package to $242.5 billion in the first three months of the fiscal year.

Congress has allotted $700 billion to the program, but has only made the first $350 billion available so far. President Bush, on the request of President-elect Obama, asked Congress on Monday to release the remaining funds.

Treasury has also paid $13.8 billion so far this year on housing and economic recovery programs, unchanged from the previous month.

According to the report, Treasury also paid nearly $43.5 billion in interest on its outstanding debt in the first quarter of the fiscal year, down from nearly $58 billion paid during the same period a year ago, reflecting the dramatic drop in interest rates on Treasury bonds.

Treasury has been issuing bonds at a record pace in the past few months to pay for its massive bailout programs. Although the Treasury adds to the deficit whenever it issues bonds, that issuance has come cheap recently as interest rates have plummeted to record lows.

Source: http://money.cnn.com/2009/01/13/news/economy/treasury_budget_deficit_Dec08/

index.htm?postversion=2009011314

Asian markets up after Wall Street rally

(CNN) -- Markets in Australia, Japan, and South Korea bolted upward Wednesday, with Hong Kong's Hang Seng up a quarter percent after a slight drop earlier.
Asian markets up after Wall Street rally

Tokyo's Nikkei index jumped 2 percent, as investors traded high on hopes for a U.S. economic stimulus package from the incoming Democratic administration. Australia's All Ordinaries index rose 1.1 percent, and Seoul's KOSPI index was up 2.1 percent.

Shanghai's composite index posted a slight drop of 0.1 percent.

U.S. President-elect Barack Obama met with his economic advisors Tuesday after a Monday meeting with Democratic and Republican Congressional leadership on his plans to stimulate the United States' sagging economy.

Obama pledged transparency and no earmarks in his stimulus bill, warning of "tough choices" and breaking "old habits."

"We're going to be investing an extraordinary amount of money to jump-start our economy, save or create 3 million new jobs, mostly in the private sector, and lay a solid foundation for future growth," he said. "But we're not going to be able to expect the American people to support this critical effort unless we take extraordinary steps to ensure that the investments are made wisely and managed well."

Wall Street rallied on Tuesday, as investors looked beyond the Federal Reserve's dour outlook on the economy and instead scooped up shares hit in last year's big sell-off.

The Dow Jones industrial average rose 62 points, 0.7 percent, to 9,015. The Standard & Poor's 500 index gained 0.8 percent and the Nasdaq composite climbed 1.5 percent.

In Europe, London's FTSE-100 index closed up 1.3 percent, the Paris CAC 40 finished the day ahead by 1.1 percent, while the DAX in Frankfurt closed up 0.85 percent.

source : http://edition.cnn.com/2009/BUSINESS/01/06/global.markets/index.html

Egypt proposes talks, cease-fire for Gaza

UNITED NATIONS (CNN) -- Egypt has put forward a plan for a truce in Gaza that would include an immediate cease-fire and meetings in Cairo between leaders of Israel and "Palestinian factions."

Egyptian President Hosni Mubarak, left, welcomes French President Nicholas Sarkozy in Egypt Tuesday.

Egyptian President Hosni Mubarak, speaking alongside French President Nicolas Sarkozy on Tuesday after the two leaders met in Egypt, invited the two sides to an "urgent meeting."

He said the discussions would focus on avoiding an escalation of the violence, securing borders between Israel and Gaza -- where Hamas militants have fired rockets into southern Israel -- and opening border crossings into and out of Gaza.

Elements of the plan, which was circulating through the United Nations late Tuesday, quickly gained support from representatives of many U.N. Security Council nations.

"Let me assure you that we understand the urgency of an end to the fighting and that we are working around the clock to bring it into being," said U.S. Secretary of State Condoleezza Rice. "In this regard, we are pleased by and wish to commend the statement of the president of Egypt and to follow up on that initiative."

Senior State Department officials late Tuesday said Rice still does not support the call for a temporary cease-fire. The United States has dismissed the idea, saying that without significant change it would just lead back to the "status quo" in the region.

"We need urgently to conclude a cease-fire that can endure and that can bring real security," said Rice. "This would begin a period of true calm that includes an end to rocket, mortar and other attacks on Israelis and allows for the cessation of Israel's military offensive."

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The Egyptian plan, according to diplomatic officials, calls for a temporary cease-fire to allow borders to be opened for humanitarian relief. The members of the Middle East Quartet -- the United States, the European Union, Russia and the United Nations -- also would be asked to the talks under Mubarak's plan.

It was unclear what role, if any, Hamas would play in the talks. Formally inviting the group, which Israel, the United States and the European Union consider a terrorist organization, could make Israel less likely to participate.

Late Tuesday, at the United Nations, diplomats including the ambassador from Libya said that Arab Nations still plan to offer a resolution condemning Israel's actions to the U.N. Security Council.

They said such a resolution would complement possible talks in Cairo, while a French diplomat said a vote on an overarching resolution is unlikely as action moves toward Egypt and the Middle East.

The meeting between Mubarak and Sarkozy came after Syrian President Bashar Al-Assad said Hamas was ready to agree to peace if the Israeli army will stop military operations and withdraw from Gaza.

"They are ready [to make a deal]," Al-Assad told CNN's Cal Perry in an exclusive interview. "They were ready, they are ready. Today, the factors have changed so the requirement will change at the same time.

source: http://edition.cnn.com/2009/WORLD/meast/01/06/israel.gaza.diplomacy/index.html

Best time to buy a car: Now

Things are scary out there, but here's how to decide which Detroit's cars and trucks are worth buying.

NEW YORK (CNNMoney.com) -- There's never been a better time to buy a car. On the other hand, there's never been a scarier or more confusing time, either.

There are big incentives out there and dealers are discounting like crazy as they try to get aging inventory off their lots.

But consumers are understandably worried about the financial health of the automakers they may be buying from, especially domestic manufacturers. So, is it worth taking the deal? Here are some points to consider.

The product: If it weren't for all the financial trouble, this would be a great time buy a car from either General Motors or Ford.

GM has some really outstanding products, including the award-winning Chevrolet Malibu, new large three-row SUVs - the GMC Acadia, Buick Enclave, Saturn Outlook and Chevrolet Traverse - and the Cadillac CTS, a world-class mid-size luxury sedan.

Ford (F, Fortune 500), meanwhile, has successfully attacked its past quality problems. Now when you buy a Ford car or crossover you can expect the same kind of dependability that was once the hallmark of Japanese brands like Toyota and Honda, according to Consumer Reports.

Beyond dependability, vehicles like the Fusion mid-sized sedan, a new, more powerful 2009 Escape crossover and the Flex large crossover are just good cars that offer practicality, style and excellent fuel economy.

Meanwhile, Chrysler has been lagging its competitors in dependability and overall product quality. The new Dodge Ram truck, with a sharper design, nicer interior and better handling than competitors' big rigs, is one product that's arguably superior, if you're looking for a truck that's better looking and more enjoyable to drive.

The prices: Auto sales are forecast to stay low until at least the end of 2009.

And while some think car prices will continue to drop, they probably won't. Manufacturers have been drastically cutting production. That means that inventories will get lower, manufacturers will have less need to pile on incentives and dealers won't be as worried about getting cars off their lots quickly.

So, from a price perspective, this really is the best time to buy. On many Ford, Chrysler and GM models, you could even get below-wholesale prices, according to pricing data at AOL Autos.

The incentives: Right after GM's financing partner, GMAC, got its own government aid package in late December, GM (GM, Fortune 500) announced it was offering 0% financing on selected products. Unfortunately for car shoppers, the deal is limited to just the Saab 9-3 and 9-5. For SUV shoppers, the 0% deal is limited to the Chevrolet Trailblazer and its variants, including the Saab 9-7X. These older truck-based designs are outclassed by competitors and even by GM's own crossover vehicles.

Still, GM is offering low-rate financing on other, better vehicles that can still save you hundreds of dollars even it's not 0%. Those rates could make it a good time to pick up one of those more attractive offerings like the CTS, Malibu or Traverse. GM is also offering big rebates on many models.

For its part, Ford is offering its "Employee Pricing Plus" program and, in many cases, they're adding big rebates on top of the price discounts.

The risks: Depreciation, the difference between what you pay for a car and what you can ultimately trade it in or sell it for, is the single biggest cost of car ownership.

And that could offset the savings if the resale value of your car takes a steep dive.

The financial troubles of America's automakers have led to more than-than-usual uncertainty about that. Looking at Kelley Blue Book value data, once a car brand ceases production, the resale value of vehicles bearing that brand drops fast.

That's true even if the manufacturer stays in business, as happened with GM's Oldsmobile brand and Chrysler's Plymouth. So if you're looking at purchasing a Saturn or Saab, for instance, keep in mind that GM is reconsidering the future of those brands.

Then there's the scary prospect that GM or Chrysler themselves might not survive the next couple of years. It's probably a safe bet that they will, with government help, but no-one can say for sure.

If the very worst were to happen and these automakers were to completely go out of business, some of their brands would likely carry on. Chrysler's Jeep brand, for instance, has already outlived several previous owners and no doubt would again. Some other company will pick up the business Even if GM were turn out all its lights, brands like Cadillac, with its unique luxury image, and Buick, which is a huge success in China, would probably carry on somehow.

Ford is the lone Detroit automaker not seeking immediate government assistance. So, from a business perspective, they seem like the safest bet for longevity. Certainly, the Ford brand itself has a secure future. Around the world, the Ford blue oval is a strong brand and Ford is putting even more emphasis on strengthening it.

For car buyers, buying the best cars from the strongest brands is always the best play, though. Ultimately, that's not good news for any of the domestic manufacturers.

Despite suffering its first operating loss since 1950, no-one is questioning the long term viability of Toyota. Or that of Honda, either. Both companies also make reliable cars that are, at worst, competitive with Detroit offerings and they have better resale value, too. Both are also offering incentives like 0% financing.

Despite Detroit's big improvements in all-around competitiveness and product quality, America's financial crisis will drive even more consumers to buy Japanese cars even as the federal government to save America's automakers.

source :http://money.cnn.com/2009/01/02/autos/trying_times/index.htm?postversion=2009010215