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Washington, DC, United States (AHN) – The Senate is scheduled to give final approval to a new debt ceiling Tuesday to save the U.S. economy from its first default in history within hours of running out of money.

The House approved the measure Monday evening.

Bickering between Republicans and Democrats continued down to the last hours before the vote.

The agreement that allows the U.S. government to borrow another $2.4 trillion also comes with tough new restraints on spending.

Spending levels would drop to the lowest levels since the Eisenhower Administration in the 1950s.

International markets reacted positively to the deal in Congress Monday. U.S. stocks rose by 1 percent when the New York Stock Exchange opened while the U.S. dollar increased in value compared to some foreign currencies.

The stock market gains were lost later in the day after a new report showed the U.S. manufacturing industry is performing poorly.

President Barack Obama admitted before the vote that he did not like the debt deal but felt there was no better option to avoid what he called “a default that would have had a devastating effect on our economy.”

Some of the first to feel the effect of the government running out of money would have been Social Security recipients and military personnel, both of whom would not have received their checks on time.

“Is this the deal I would have preferred? No,” Obama said during a press conference Monday.

“I believe that we could have made the tough choices required on entitlement reform and tax reform right now, rather than through a special congressional committee process,” he said. “This process has been messy. It’s taken far too long.”

The deal would raise the debt limit while reducing spending in two stages.

The first stage would cut $917 billion from the budget over 10 years. The second stage would require a special congressional committee to convene this year to find another $1.5 trillion in cuts by revamping the tax system and reducing social benefits.

The tax changes are most likely to eliminate tax breaks for high income individuals and corporations. Social benefit programs that could shrink under the plan include Medicare.

The higher debt limit would come on top of the nation’s current $14.3 trillion deficit. Much of the money is owed to China.

Obama administration officials said the additional $2.4 trillion in borrowing should give the U.S. government enough money to pay its bills until 2013.

“In the end, compromise won out,” White House Press Secretary Jay Carney said.

Former presidential candidate Sen. John McCain said the conservative sentiment created by the Tea Party helped sway the deal in favor of reduced spending instead of higher taxes.

“I agree the Tea Party movement has had an effect in that I don’t think without the Tea Party we would have had an agreement,” the Arizona Republican said in a television interview Monday on Fox News.

He said “the president had to back down” and give up “his primary position that we had to have tax hikes.”

Among critics of the debt ceiling deal is Republican presidential front-runner Mitt Romney.

He says the deal will result in higher taxes and a smaller military. Hundreds of billions of dollars in reduced government spending would come from the Defense Department budget.

“As president, my plan would have produced a budget that was cut, capped and balanced – not one that opens the door to higher taxes and puts defense cuts on the table,” Romney said in a statement. “President Obama’s leadership failure has pushed the economy to the brink at the eleventh hour and 59th minute.”

Other concerns are being raised by economists about the last-minute deal.

It might not be enough to prevent the U.S. economy’s credit rating from being downgraded from its current AAA level, which is the highest rating, economists say.

A downgrade would be likely to result in higher local taxes and more job cuts, according to economists.

“It definitely would have a dampening effect on the economy,” said Ellen Zentner, senior U.S. economist at Nomura Securities in New York.

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Dhaka, Bangladesh (AHN) – Bangladesh, the world’s poorest Muslim majority country, unveiled a $22 billion deficit budget high on defense expenditures and low in farm spending. The government projects revenue income at $16.01 billion in the coming fiscal year, up from nearly $13 billion. The budget was placed in Parliament on Thursday amidst a boycott by the main opposition Bangladesh Nationalists Party.

The overall agriculture budget decreased more than 12 percent while defense spending increased almost 29 percent, the largest rise among major sectors. Instead of investing in human development and infrastructure, money will go towards increasing Bangladesh’s military firepower and salaries of defense personnel.

Finance Minister Abul Maal Abdul Muhith has called for higher allocation in the energy and farming sectors to perk up economic growth. In a move to end a serious of power outage, the power production saw an increase of almost 20 percent as the finance minister outlined a plan to increase power generation by almost three times adding 7,800 megawatts to the national grid by 2013.

The minister set a 7.0 percent growth target for the gross domestic product (GDP) starting on July 1.

The budget holds down the rising inflation, principally blamed on price spirals and depreciation of the local currency, he explained.

Economic think-tank Unnayan Onneshan, in a quick assessment on Thursday said the government might face extraordinary challenge to reach the growth target as quoted in the budget document of fiscal 20111-12 due to lack of supporting base in the overall economy of Bangladesh.

The fiscal space squeeze and IMF condition for accessing one billion dollar loan to Bangladesh might also pave the way for increasing different type of inequality; such as geographical inequality, income inequality and social inequality in the country, the think-tank said.

Finance Minister almost echoed with the think-tank and said that the next fiscal year would be challenging for the economy. “Recovery from the recession and political instability pose a great risk for the economy and we’re going to form a taskforce to deal with it,” he told journalist on Friday.

He does not hesitate to blame that the economy has fallen into trouble after recovery from recession due to commodity crisis and in Bangladesh political stability rubs salt to the injuries.

The anti-tobacco lobby expressed mixed reaction, when the government increased tax to 42.5 percent to discourage smoking. The activists were expecting strict economic restrictions of the tobacco growers.

Bank stocks went up Wednesday and Thursday riding largely on report that corporate tax will go down to 40 percent for commercial banks.

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Washington, D.C., United States (AHN) – The Republican-dominated U.S. House of Representatives, as expected, rejected a proposal to increase the federal debt limit without budget cuts on Tuesday.

On a 318-97 vote, the House turned down a proposal from the Obama administration to increase Washington’s debt limit to $16.7 trillion from the current $14.3 trillion.

All Republican legislators voted against the measure that would have hiked the federal debt limit to an amount enough to cover government bills until the end of 2012.

In rejecting the measure, the GOP said they would push for sharp spending cuts and binding budget process reforms, House Majority Leader Eric Cantor said.

Cantor cited survey results that majority of American voters do not favor increasing the debt limit without spending cuts. The legislator said American families and businesses want the federal government to live like the rest of the country does – that is to tighten their belts and step relying on credit.

Even some Democrats voted against the measure after some party members criticized the bill as a Republic political strategy because the Republic leaders brought the bill to a vote and then asked caucus members to vote against it.

The defeat of the measure was imminent despite the warning by the U.S. Treasury Department that the U.S. faces defaulting on its debt if Congress does not allow the federal government to borrow more by August.

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Sacramento, CA, United States (AHN) – The impasse over extending taxes continues in California despite a revised budget plan from Gov. Jerry Brown that relies on an unanticipated rise in revenue. Republicans have insisted on an alternative plan that would cut compensation for state workers by 10 percent.

The updated budget takes into account a current-year tax revenue increase of $2.8 billion and a budget year earnings boost of $3.5 billion, for a total adjusted revenue of $6.6 billion.

The windfall, combined with steps already implemented by Brown since taking office, has reduced the state’s deficit from $26.6 billion to $9.6 billion, which consists of a current shortfall of $4.8 billion and another $4.8 billion in the fiscal year starting this July.

Brown’s previous budget plan reduced spending by $12.5 billion and relied on revenue of $12 billion from extending taxes. His new budget cuts spending by $11.2 billion because of an increase in funds for public schools by $3 billion.

Additional cost-cutting measures such as the elimination of 43 boards and commissions, as well as more than 5,000 state jobs, compensates for a revenue package that has failed to attract support from Republicans.

Brown, who assumed office in January having served two terms as governor three decades ago, has dropped his plan to raise the personal income tax. Under his revised plan, Californians will pay $2 billion less in income taxes compared to his initial proposal. However, he is still seeking to extend the sales tax and vehicle license fee for five years through a ballot.

The tax package represents 42 percent of the revised plan, while spending cuts account for 48 percent. Cuts include previously announced measures such as the closure of 70 parks to save $11 million in the first year, a hiring freeze and the halving of the number of state cars and cell phones.

The ballot for the tax extensions must first be approved by two Republicans from the Assembly and two Republicans from the state Senate.

Republicans rejected the governor’s revised plan and accused him of “fund[ing] bigger government.”

“Assembly Republicans showed that we can protect funding for the classroom and law enforcement without raising taxes,” Assembly Minority Leader Connie Conway said in a statement. ” We call upon the governor to stop trying to raise people’s taxes and start working across party lines on a no-tax increase budget compromise.”

State GOP Chair Tom Del Beccaro added, “The bottom line is that Brown’s demand to increase spending while we have a deficit means that he still doesn’t understand that we can no longer spend beyond our means.”

The statemate with Republicans occurred in March when the governor suspended negotiations over what he said were “an ever changing list of collateral demands” in return for support for a special election, such as giving a $1 billion tax break to out-of-state corporations so the companies would bring jobs to California.

The alternative GOP budget plan relies on the higher April revenue to prevent cuts to education and law enforcement. It does not raise taxes and calls on state workers to “do their part” with a 10 percent reduction in pay, benefits and other employee costs, which Republicans say would provide the government with $1.1 billion in savings.

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Sacramento, CA, United States (AHN) – California Gov. Jerry Brown on Monday was set to unveil an updated budget plan to close a record $26.6 billion deficit while taking into account better-than-expected April tax receipts and Republican opposition to a June ballot on tax extensions.

The announcement will come as the end of the fiscal year looms, and teachers and students in the state, which has the nation’s largest university system and the world’s eighth-largest economy, protest further cuts.

Brown early this year proposed a plan reducing spending by $12.5 billion, including $1.4 billion in cuts to higher education, and generating $12 billion from an extension of taxes that are due to expire this summer.

The tax extensions require a June ballot that in turn, must first be approved by two Republicans from the Assembly and two from the state Senate. The deadline for including the extensions in the ballot has passed, and unions have asked lawmakers to instead pass a bill allowing the ballot.

The governor’s revised budget plan is expected to seek at least some of his revenue-generating tax hikes even as Republicans point out the state’s more than $2 billion in unanticipated April tax revenue.

Last week, Brown announced drastic measures such as eliminating the Unemployment Insurance Appeals Board and shuttering 70 of 278 state parks, including the governor’s mansion.

Eliminating the appeals board, which is composed of appointees who preside over appeals on disputes about jobless and disability claims, would save the state $1.2 million.

The closure of parks would reduced spending by $11 million in the fiscal year starting in July, and another $22 million the following year. Parks with the least attendance and cultural and environmental significance were chosen for the closure, which will not affect 92 percent of public attendance in parks.

Brown, who served as governor for two terms nearly three decades ago, also plans to merge the state’s two personnel agencies into a single human resources department to save at least $5.8 million.

Previously, he ordered a hiring freeze and slashed the number of state cars and cell phones by 50 percent.

Republicans, who released an alternative budget plan last week, have railed against the latest proposals as “posturing” and ” misguided threats.”

State GOP spokesman Mark Standriff called the planned closure of parks “a ‘Washington Monument Strategy’ that is both cynical and manipulative, and shows little respect for the taxpayers.”

The Republican plan relies on the higher April revenue to prevent cuts to education and law enforcement. It does not raise taxes and calls on state workers to “do their part” with a 10 percent reduction in pay, benefits and other employee costs, which the GOP says would provide the government with $1.1 billion in savings.

The California Teachers Association, which held statewide protests last week, said the GOP’s alternative proposal would leave a $14.7 billion budget gap and fails to provide “real solutions.”

The San Francisco Chronicle said in its editorial on Monday that the GOP plan “should be dismissed as a nonstarter,” because it “included a heavy dose of borrowing and reliance on ‘savings.’ ” The newspaper also blasted Republicans for pushing “a ridiculously long wish list that strayed far from the subject of the budget.”

In March, Brown ended negotiations with Republicans after what he said was “an ever changing list of collateral demands” in return for support for a special election, such as giving a $1 billion tax break to out-of-state corporations so the companies would bring jobs to California.

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Three in four Americans name some type of economic issue as the “most important problem” facing the country today — the highest net mentions of the economy in two years. The economy in general (35%) and unemployment (22%) are Americans’ top two concerns, with the federal budget deficit in third (12%).

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This recession has motivated some people to attempt extreme frugality measures. Instead of waiting for the inevitable shortfall requiring them to take out payday loans, some people have decided it’s best to nip the money beast early and just do without. They reason that by forgoing some modern conveniences they are able to save hundreds of dollars a month, which they stash away in savings for an emergency fund. If you’re thinking of ways to cut expenses, here are a few that might make you pale in horror, but that others have found are acceptabl lifestyle choices that save them money.

No Air Zone

Air conditioning is one of those modern conveniences that people take for granted these days. However, it comes with some heavy duty utility bills. That’s why some families have pulled the plugged and declared their homes no air-conditioned zones. This is happening even in the South where air conditioning is seen as an absolute necessity. In these areas, a family may decide to go air-less for a month at the beginning of the hot season and at the end, saving some if not all of their utility bill. Instead of air-conditioning, lifestyle changes are made to incorporate grilling, cool drinks, fans, and lots of activities outside.

Become a Vegetarian

Eating meat is more expensive pound per pound than vegetables. Some people are opting for vegetarianism as a way to save money as well as to be healthier. If you want to take this even further, you can choose to start vegetable gardening to help reduce your food bill even further.

Go Car-Less

In metropolitan areas with great public transportation, this is easier than you might think. A car is definitely one of the largest expenses in anyone’s budget as it comes with high gas costs, repair bills, and insurance premiums. Taking the car out of the budget can save several hundred dollars instantly. It does require some patience and familiarity with the public transportation system, but may offer monthly passes that can cost you just a fraction of what it would cost to own and maintain your own car. For a little extra inconvenience, many people are finding it a workable trade in greater monthly cashflow to lose the car.

DECATUR – Even as the Decatur Park District attempts to slim its budget by reducing seasonal employees, the district finds itself forced to pay more in unemployment benefits.

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Shaken by gang violence, high unemployment, school budget cuts and other realities of modern life, a coalition of religious leaders and community members will spread across the city today to pray for relief.

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I had the change to sit down yesterdau with Sweden’s finance minister, Anders Borg, on the sidelines of the IMF Spring Meetings here in Washington. Borg described the meetings as the most “relaxed” that he’s attended since the start of the financial crisis. Then again, with Sweden raising its growth projections last week and predicting a budget surplus and falling unemployment, he can afford to be more relaxed than some of his colleagues. We talked about the reasons for Sweden’s surprising recent success (a combination of bad experience, luck, and good policy), why Sweden is reluctant to participate in a bailout of Portugal, and why he thinks U.S. politicians need to get real and raise taxes.

Our conversation is below the jump:[[BREAK]]

How have this year’s IMF meetings been going?

If I compare it to the other IMF meetings and G-20 meetings that I’ve been in during the crisis, everyone’s much more relaxed now. Most countries, with some small exceptions around the Mediterranean, are in much better shape than they have been. So you don’t have the tension that people are under pressure from the economic crisis to the same extent.

Partly I think it’s a little bit of a pause before the really tough decisions. For example here in the U.S. when it comes to deficits — I know because we’ve done a lot of fiscal restructuring in Sweden that that will bring a lot of political tension — but we are maybe a year or two before the U.S. will really start to get serious about their deficits.

But it’s been probably the most relaxed meetings that I’ve been to since I’ve been coming here. People are very much interested in our experience because we tend to be such an outlier in Europe. Sweden’s latest growth number was 7.2 percent. The debt figures are coming down. So people are interested in how this could be — it’s not a simple explanation.

So what is the explanation?

I think it’s a combination of bad experience, luck, and good policy. The bad experience is a real asset. What we went through in the early 90s means that around 97, 98 percent of the public agree we should have a balanced budget. The experience of fiscal restructuring is that it’s actually people who are less well off who are dependent on welfare, which means that they get a bigger part of the hurt when you do fiscal restructuring. So that means that everyone says, “we don’t want to go back to the ’90s. We don’t want to go back to the ’80s and ’70s with inflation and disorder in the labor market. So the bad experience is an asset.

Also, it is a little bit to do with luck. We have a composition with manufacturing, high tech, and iron ore, that is very well situated in the kind of global markets that we now see. Our world market will increase on average 7 percent in the coming years. So we have very strong positioning, which is at least party luck.

The third reason is good policy. We did a lot of structural reforms in 2006 and 2008 with tax cuts, huge restructuring of our early retirement system, and a huge restructuring of our unemployment benefits. That has been a very strong supply-side force on the labor market. So when we went into the crisis, we thought we would have a deficit of some 4 percent. But the underlying trends from these structural reforms have been so strong that we ended up with very close to a balanced budget.

What’s your sense of Europe more broadly? Do you think the crisis is nearing an end?

You have three different things going on at the same time. One is a very strong recovery in Northern Europe. It is not only Sweden that is growing. Estonia, Poland, Finland: all of these countries are forecasted to have around 5 percent growth next year. Germany is obviously in a much stronger position. So, the northern part of Europe is growing very fast.

This could be an issue in a couple of years, because you still have a lot of problems in the south of Europe, which means that the [European Central Bank] will be very reluctant to raise interest rates. So there is a risk that we could have a more unbalanced development.

We have two really big problems to deal with: one is the banking sector. The recapitalization that is needed in Europe is substantial. Then you have the huge issue of public finances which is both shot-term and long-term. Short term, obviously it’s Greece, Portugal, and Ireland. That could be dealt with. The governments are doing the right things. They are increasing VAT rates and the retirement age and so forth.

The other problem is that the whole of Europe is now indebted. So the room for stabilization policy in the next downturn will be very limited. We could have a very severe and harsh crisis the next time we see a slowdown in the world economy.

So from what I understand, Sweden is not interested in participating in a bailout of Portugal?

We have participated in Latvia — which nobody else did but the Nordics, we participated in Iceland — which nobody else did but the Nordics, we participated in Ireland — it’s not as obvious why we should do that but we should always try to be working in solidarity. As for Portugal, I think there are still a lot of uncertainties to be answered by the Portuguese government before we make that decision. I would say that it’s more unlikely we would participate in the Portuguese case than in Ireland.

Why is that, exactly?

Well there’s a limited responsibility. Why did Spain not participate in Latvia? Why didn’t France help us with Iceland? Every country has a neighborhood where you can get the taxpayers to accept that we need to chip in. We’ll contribute more than a billion dollars through the IMF and EU funds. A billion dollars is quite a lot of money. But we will follow the situation closely and if we have the sense that this is systemic risk, we might have to contribute.

In previous meetings it has seemed like there was a tension between the U.S. pushing a more expansionist monetary policy and European governments favoring austerity measures. Is that tension still there?

For us to say that we would ever be over-expansionary, would be very difficult. The U.S. can be very expansionary. You have 10 percent deficit and interest rates are still hovering around 1,2,3, percent. It’s basically only the U.S. that could behave that way. For everybody else it would mean huge bond spreads. To my mind, the U.S. is saying to the rest of us that we should be more expansionary, but we’re also on top of a huge U.S. debt. The markets will not punish the U.S., they will punish everybody else standing on top of that debt. I would be very cautious about running a huge debt like the U.S. because we are a small vulnerable country. That is true of many of these European countries.

Have you been following the budget debate here in the United States? What’s your sense as an outside observer?

When you look at fiscal restructuring — what the U.S. needs to do — it is very clear that they need to increase taxes and cut expenditures. The most obvious thing to do would be to introduce a VAT . Look at the U.K. They are run by a Tory government — they increased the VAT. Look at Greece — it’s a Social Democratic government, they’ve increased VAT. All of these countries have increased VAT because it’s a broad-based tax with low costs and limited impact on growth.

It’s also quite clear that the U.S. doesn’t have control over its healthcare sector. The cost control of Medicare and Medicaid doesn’t really work. We’ve all seen the Congressional Budget Office projections so it is quite obvious that you need to strengthen the revenue side, but also have much better control of the expenditure side.

I’m not sure to what degree people in Sweden are aware of this, but in U.S. political debates, your country is often used as a kind of code word for socialism, high taxes and a generous welfare state. Do you think this view Americans have of Sweden is still accurate?

During [the Moderate Party's] period in government, we’ve cut taxes quite substantially. For ordinary people, we’ve cut them the most. We’ve also been restructuring our social welfare system. But our idea is that you can keep social cohesion by giving priority to education, healthcare. Everyone, regardless of income can get good healthcare and good education. We think that we are modernizing the Swedish model, making it more flexible, and trying to keep as much social cohesion as we can.

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