Fri, Sep 04, 2020 page10

• US federal budget deficit to hit a record US$3.3tn

  • AP, WASHINGTON
  • • 
    • 
    • 

  The US federal budget deficit is projected to hit a record US$3.3 trillion as huge government expenditures to fight the COVID-19 pandemic and to prop up the economy have added more than US$2 trillion to the federal ledger, the Congressional Budget Office said on Wednesday.

  The spike in the deficit means that federal debt would exceed annual GDP next year — a milestone that would put the US where it was in the aftermath of World War II, when accumulated debt exceeded the size of the economy.

  The US$3.3 trillion figure is more than triple last year’s shortfall and more than double the levels experienced after the market meltdown and Great Recession of 2008-2009.

  US government spending, fueled by four COVID-19 response measures, would register at US$6.6 trillion, US$2 trillion-plus more than last year.

  The recession has caused a drop in tax revenues, but the changes are not as dramatic as seen on the spending side, with individual income tax collections running 11 percent behind last year. Corporate tax collections are down 34 percent.

  The economy shut down in the spring so people could be in isolation, in a failed national attempt to defeat the pandemic. That shutdown led lawmakers and US President Donald Trump to pump money into business subsidies, larger unemployment benefits, US$1,200 direct payments and other stimulus steps that have helped the economy in the short term.

  Most economists are untroubled by such huge borrowing when the economy is in peril, and the debt was barely a concern when a cornerstone US$2 trillion relief bill passed almost unanimously in March.

  However, now that lawmakers and the White House are quarreling over the size and scope of a fifth virus relief bill, Republicans are growing skittish at the enormous costs of battling the pandemic.

  The Democratic-controlled US House of Representatives passed a US$3.5 trillion measure in May, though House Speaker Nancy Pelosi said she is willing to cut that figure to US$2.2 trillion.

  However, caseloads remain unacceptably elevated, as the virus exacts a painful, lingering toll on the economy and sentiment remains high for a fifth virus rescue package that would include money to reopen schools, patch state budgets and continue enhanced jobless benefits that have kept families afloat.

  Among Republicans, there seems to be less ardor for a deal — at least at what they see as unfavorable terms. Republican leaders had been pressing for a package in the US$1 trillion range, but party talks last month have focused on a smaller package.

  The enormous deficit is bringing the federal debt, as measured by the size of the economy, near levels not experienced since the end of World War II, when explosive borrowing to finance the war effort caused a historic spike.

  However, those levels quickly receded during the postwar boom — something that would not happen now, since federal spending is now dominated by retirement programs like Medicare and Social Security, whose costs increase automatically with inflation and the ongoing retirement of the Baby Boom generation.
• Most Popular

  • 1

    Referendum, 26 recall votes could cost NT$1.62 billion

  • 2

    Conference on rebuilding Ukraine opens in Italy

  • 3

    Dispute between US, Brazil escalates

  • 4

    MOFA welcomes remarks by NATO’s Rutte

  • 5

    TSMC’s materials executive quits