US production 'worse than expected'

Figures show slump in industrial production as Obama prepares to unveil housing plan.

    Americans hope Obama's stimulus packages will prop-up the US' declining economy [AFP]

    Housing package

    The Obama administration announced earlier on Wednesday a $75bn plan to help millions of distressed homeowners who are struggling to pay their mortgages and risk losing their homes.

    Obama said, in remarks prepared ahead of his signing of the plan, that the move to tackle mortgage foreclosures would help between seven and nine million Americans.

    In video

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    "The American dream is being tested by a home mortgage crisis that not only threatens the stability of our economy, but also the stability of families and neighbourhoods," Obama said.

    "All of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen."

    The housing initiative is designed to help borrowers refinance, and provides incentive payments to mortgage lenders, specifically addressing homeowners with negative equities - those paying mortgages at a higher rate than their homes are actually worth.

    John Terret, Al Jazeera's correspondent in New York, said: "The key is that this is one of four strands that the Obama administration is trying to push through at the moment to get the economy moving again.

    "One is the giant stimulus package, then the homes package today, the auto-industry bailout and the bank bailout which is currently being worked on."

    Stimulus package

    The move came a day after Obama signed the $787bn American Recovery and Reinvestment bill in Denver, Colorado, saying the package, a mixture of tax cuts and spending for infrastructure projects, would lay the groundwork for "real and lasting change for generations to come".

    The stimulus plan

     Plan is worth $787bn
    $287bn set aside for tax breaks
     $500bn allocated for spending, of which:
     $120bn will go towards roads, transport and broadband infrastructure
     $60bn for healthcare and medical research
     $6bn for renewable energy loans

    "We're putting Americans to work doing the work that America needs done in critical areas that have been neglected for too long," he said.

    Obama had previously warned of economic "disaster" if US congress, which passed the bill last week, did not act swiftly on the crisis.

    Al Jazeera's Terrett said most economists felt it was better to have a stimulus package rather than not, but concern remains about whether it will work as the global economy continues to slump.

    Obama said that the bill marked "the beginning of the end - the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs".

    Democrats and Republicans spent days battling over the plan in both the US House of Representatives and the senate, as Republicans complained that the initial size of the bill was too large and did not incorporate enough tax cuts.

    Tax incentives

    Roughly one-third of the stimulus funds will be spent on tax cuts, totalling $286bn, in an effort to boost consumer spending, a vital engine of the world's largest economy.

    In depth

    The cuts include a one-off $400 tax break for most individual US workers and $800 for couples, including those who do not earn enough to pay income taxes.

    A further $120bn is being allocated to infrastructure projects covering transportation, road building, improving the nation's power grid and renewable energy installations.

    Consumers will also receive tax incentives to buy first homes and new cars.

    Poor people and workers who have lost their jobs will benefit from increased unemployment and food benefits and subsidies for health insurance.

    The bill also includes a controversial "Buy American" provision that, despite being watered down, has angered US trading partners.

    Despite the plan, financial analysts say the US economy will remain feeble throughout 2009. Some economists predict that the US budget deficit for 2009 will hit $1.6 trillion, including the stimulus spending - about three times last year's shortfall.

    SOURCE: Agencies


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