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U.S. Deficit Tops $1 Trillion In First 11 Months Of 2019 #GotBitcoin?

The deficit, up 19% compared with a year ago, has exceeded $1 trillion for the first time since 2012. U.S. Deficit Tops $1 Trillion In First 11 Months of Fiscal Year, Treasury Says (#GotBitcoin?)

The U.S. budget gap widened to more than $1 trillion in the first 11 months of the fiscal year, the Treasury Department said Thursday, the first time deficits have topped that amount in seven years.

U.S. Deficit Tops $1 Trillion In First 11 Months of Fiscal Year, Treasury Says (#GotBitcoin?)

Higher spending on the military, rising interest expenses on government debt and weak revenues early in the fiscal year combined to push the deficit up 19% from October through August, compared with the same period a year earlier. Government spending climbed 7%, to $4.1 trillion, outpacing higher federal tax receipts, which grew 3%, to $3.1 trillion.

That brought the total deficit to $1.07 trillion so far in fiscal 2019, which started Oct. 1, or 4.4% as a share of gross domestic product.

A strong economy typically leads to narrower deficits, as rising household income and corporate profits help boost tax collections, while spending on safety-net programs such as unemployment insurance tends to decline.

The U.S. economy has been growing for 10 years as of July, the longest economic expansion on record. Yet annual U.S. deficits are on track to exceed $1 trillion starting this year, due in part to the 2017 tax law, which constrained federal revenue collection last year, and a 2018 budget deal that busted spending caps enacted in 2011.

Senior Treasury officials attributed this year’s higher deficit primarily to a surge in government spending, and emphasized that federal revenues have climbed nearly 7% since May, in large part reflecting a robust economy and low unemployment. Corporate tax revenue in particular has rebounded in recent months, after a period when analysts were unsure why it was running below Congressional Budget Office projections.

Still, revenue growth has continued to lag the broader economy, and is below where forecasters projected it would be prior to the 2017 tax cuts.

Federal spending has continued to climb. The Treasury said Thursday spending on the military and interest costs on government debt each rose 9% from October through August, and Medicare expenses increased 10%.

More broadly, annual deficits are projected to more than double as a share of the economy over the coming decades, as a wave of retiring baby boomers pushes up federal spending on retirement and health-care benefits.

Those deficits have led the Treasury to ramp up borrowing in recent years. The government said it expected to borrow more than $1 trillion for the second year in a row in 2019.

Updated: 9-26-2019

Senate Passes Short-Term Spending Measure

Stopgap bill would keep government open through Nov. 21 as lawmakers try to pass new annual spending legislation.

The Senate passed a short-term funding measure to stave off a possible government shutdown after the end of the month, sending the legislation to President Trump’s desk just days before the end of the federal fiscal year on Sept. 30.

The stopgap bill, which passed the House last week, would keep the government open through Nov. 21 as lawmakers of both parties try to pass new annual spending legislation. A White House official said Mr. Trump would sign the temporary bill by Oct. 1, but the exact timing was unclear. The bill also extends a number of health-care programs and other expiring measures, including the National Flood Insurance Program.

The bill’s passage Thursday came as talks on the yearlong spending bills run into a familiar obstacle: deciding how much money to allocate for building a wall along the U.S.-Mexico border. Entrenched partisan disagreement over money for the wall led to the longest government shutdown in U.S. history, which ended this year after 35 days.

Those already difficult negotiations will now also have compete with the beginning of a formal impeachment effort in the House. Lawmakers will leave Washington at the end of this week for a two-week recess, giving them less than two months when they return to arrive at a compromise.

While the House, controlled by Democrats, has passed the vast majority of its spending bills, the GOP-controlled Senate hasn’t approved any bills on the e floor. Republicans in the Senate held off on writing individual spending bills this summer as the Trump administration and Congress first negotiated overall spending levels and raising the debt ceiling. The House and Senate will need to reconcile any differences between their bills before they can send them to the president.

Progress in the Senate has slowed as Republicans push to pass $5 billion more in wall funding and Democrats object to approving any money for a border wall. Democrats are also opposing bills that don’t curtail the president’s ability to redirect federal funds to the wall, opening another front that will affect a broader swath of spending bills.

“This is a waste of taxpayer dollars and bad for our country,” said Sen. Patrick Leahy (D., Vt.), the top Democrat on the Senate Appropriations Committee. “It is not about solving real problems, it is about fulfilling a campaign promise.”

Mr. Trump declared a national emergency in February after Congress didn’t approve the level of wall funding he had sought, allowing him to pull money from the military to build the wall. That maneuver has earned bipartisan condemnation, as 11 Republicans joined Democrats in the Senate on Wednesday to approve a resolution that would block the president’s re-designation of funds. The resolution is expected to pass the House Thursday, while the White House has indicated it will veto the bill.

Senate Majority Leader Mitch McConnell (R., Ky.) and Senate Minority Leader Chuck Schumer (D., N.Y.) have traded partisan jabs over spending in recent weeks. Each has blamed the other for putting partisan politics above the necessary task of funding the government, including the military.

“My Democratic colleagues who don’t support the administration’s border security agenda should not take out their frustration on our armed forces,” Mr. McConnell said.

Even as party leaders battle, however, staff for the Appropriations Committees in the House and Senate have begun discussions on how to allocate money between the various spending bills. Senate Appropriations Chairman Richard Shelby (R., Ala.) is set to meet Friday with Mr. Trump to discuss how to avoid another shutdown.

“We’re going to be discussing overall the situation as it exists as we see it in the appropriations process and discuss, I hope, how to move it,” Mr. Shelby said.

Updated: 10-4-2019

Trade Gap Widened in August

Deficit rose to $54.9 billion as Americans bought more goods from abroad, exports grew too.

The U.S. trade gap widened in August as American consumers bought more cellphones and other goods from abroad while businesses exported more oil and autos, a sign of the economy’s resilience amid a global economic slowdown.

The trade deficit in goods and services increased 1.6% from a month earlier to a seasonally adjusted $54.9 billion in August, the Commerce Department said Friday.

The report offered a reassuring sign about the overall health of the U.S. economy and the willingness of Americans to spend despite a spate of weak manufacturing data, cooling global growth and uncertainty around the U.S.-China trade war.

“The good thing about the report is you want to see exports and imports growing.” said Joel Naroff, president of Naroff Economic Advisors.

The growing trade gap, however, will hold down U.S. economic growth in the third quarter slightly, analysts said. Jim O’Sullivan, chief U.S. economist at High Frequency Economics, estimated trade would shave about 0.2 percentage point from the annualized growth rate in the July to September period.

The report presents a mixed assessment of the progress of the president’s trade policies that are aimed, in part, at narrowing the trade deficit between the U.S. and its major trading partners, especially China.

The trade gap with China shrunk slightly in August. U.S. goods exports to China picked up, owing to Beijing’s resumption of agricultural purchases in recent months. Chinese companies had largely halted purchases from U.S. farmers amid the trade tensions but have gradually resumed those purchases in a bid to get toward a deal.

U.S. exports of foods, feeds and beverages to China climbed to $1.5 billion in August, the best month since January of 2018, and up from $1.2 billion in July.

The Trump administration has imposed a series of increasingly steep tariffs on imports of Chinese goods, causing Beijing to retaliate. Talks have so far not produced a comprehensive agreement.

U.S. and China’s trade negotiators are meeting next week in Washington for the first round of high-level talks since July.

The president’s goal of persistently narrowing the trade gap, however, has proved elusive.

Overall exports were up 0.2%, driven by a 3.4% increase in exports of industrial supplies, particularly fuel oil. Automobile exports also rose 2.7% to $14.28 billion, the highest level since July 2014.

But imports grew faster—climbing 0.5% in August from July, driven by a 3.4% increase in consumer goods imports on the month to $57.23 billion, the highest level on record. Imports of cellphones alone were up 13.3% in August from July, Commerce reported.

The report also highlights once again the diverging economic outlooks between U.S. households and businesses, particularly manufacturers. Household spending remains relatively strong. It grew 2.3% in August over the previous year after adjusting for inflation, the Commerce Department reported in September.

Factories, on the other hand, are struggling. Imports of industrial supplies, mostly commodities, declined 3.3% in August from July and are down 8.3% over the first eight months of 2019 versus the same period in 2018. Imports of capital goods such as computers or machines ticked up slightly in August but remain down about 1% year-to-date.

An index of new orders for manufacturing exports has pointed to declining activity for three straight months and in September hit the lowest level since March 2009, according to the Institute for Supply Management. That could signal a decline in overall exports in the September trade report, expected Nov. 5.

Overall factory activity also fell for the second straight month, the group said, which has led U.S. firms to cut back on orders from overseas suppliers.

Similar surveys in Europe and Asia released earlier this week also pointed to a manufacturing slowdown.

That has been holding down U.S. exports of manufacturing equipment. Capital goods exports are down 1.6% so far in 2019 over the same period in 2018. That decline is mostly driven by a fall in exports of civilian aircraft, a possible consequence of the grounds of the Boeing 737 MAX.

The bleak global trade picture could persist through the end of the year. The World Trade Organization said Tuesday it expected international trade in goods to grow by just 1.2% this year, the lowest annual increase since 2009.

The U.S. said Wednesday it would impose tariffs on $7.5 billion in aircraft, food products and other goods from the European Union after the WTO authorized the levies Wednesday, citing the EU’s subsidies to Airbus SE.

Updated: 10-25-2019

Trump Is Indeed Making America Great Again. Greatly In Debt That Is!

U.S. Annual Budget Deficit Nears $1 Trillion With 26% Rise

The U.S. budget deficit widened to almost $1 trillion in the latest fiscal year, surging to the highest level since 2012 as President Donald Trump cut taxes and boosted spending.

The federal government’s gap increased by 26% to $984 billion in the 12 months through September, representing 4.6% of gross domestic product, the Treasury Department reported Friday. The fourth straight increase confirms that the deficit under Trump is on pace to expand to historic levels.

The GOP tax-cut package will cost $1.5 trillion over a decade, and few economists outside the administration expect it will continue to fuel growth. The deficit — which has little precedent at these levels outside recessions or wartime — is set to widen further as spending increases for mandatory programs and interest payments.

The ballooning gap has stirred vigorous debates over how much the government can borrow and spend without driving up interest rates or inflation. At the same time, price gains and yields remain historically low despite the expanding deficit, which was as low as 2.2% of GDP under Trump’s predecessor, Barack Obama.

For the 12-month period, spending rose 8.2%, the most since 2009, totaling $4.45 trillion on increased outlays for the military, health care and education. Revenue advanced 4% to $3.46 trillion, helped by $70.8 billion in customs duties. For September alone, the surplus was $82.8 billion, compared with $119.1 billion a year earlier.

“President Trump’s economic agenda is working,” Treasury Secretary Steven Mnuchin said in a statement accompanying the release. “In order to truly put America on a sustainable financial path, we must enact proposals — like the president’s 2020 budget plan — to cut wasteful and irresponsible spending.”

By contrast, Leon Panetta, a former budget director under President Bill Clinton, said in a statement issued by the deficit-hawk group Committee for a Responsible Federal Budget, where he is co-chair: “Instead of getting our fiscal house in order and preparing for the next downturn, our leaders continue to binge on debt-fueled tax cuts and spending hikes rather than showing the leadership necessary to set our fiscal path.”

The non-partisan Congressional Budget Office has forecast that the deficit will top $1 trillion in 2020, with estimates showing a shortfall of about $1.2 trillion each year over the next decade. That would amount to nearly 5% of total gross domestic product, a measure that puts the deficit in context of the overall economy.

Election Campaign

Trump’s 2020 election bid is beginning to ramp up and he’s eager to show that his three-pronged economic agenda of tax cuts, deregulation and new trade deals have spurred growth. However, key indicators, such as business investment in equipment and machinery, have cooled lately despite incentives from tax policy. In addition, the trade tariffs are causing businesses to become hesitant with spending, while research has shown that the tax cuts are most favorable to higher-income Americans.

The president has repeatedly blamed the Federal Reserve for hampering the economy by raising interest rates too high last year and failing to cut quickly enough. The central bank is projected by economists to cut interest rates next week for the third time in three months. Officials may also telegraph that they are likely to pause for some time before making another rate move.

Fed Chairman Jerome Powell has repeatedly warned that the U.S. is on an unsustainable fiscal path. But economists are revisiting traditional ideas about how much debt can be issued, and markets don’t appear worried.

Democratic candidates seeking to challenge Trump in 2020 are pushing plans to widen access to health care and education that could cost trillions of dollars. And yields on U.S. Treasuries have fallen sharply this year to the lowest level since 2016 amid a weaker growth outlook as well as investors seeking better returns than even lower-yielding bonds from overseas.

Tariff Revenue

The deficit may have exceeded $1 trillion had it not been for the trade war with China, where Trump has escalated levies over the past year. The customs-duties revenue represented a 71% increase from 2018, as American companies paid more at the border for Chinese imports, steel and other goods. While the countries came to a preliminary agreement that’s delayed at least one planned increase in levies, current tariffs aren’t being rolled back yet.

Government outlays have provided a sizable boost to U.S. GDP amid a slowdown in business investment. Federal spending rose at an annualized pace of more than 5% in the first half of the calendar year, more than double growth in the economy as a whole, according to the Commerce Department. That was helped particularly by military spending.

The tax cuts have also been credited with helping juice economic growth last year. Yet the effects of the reductions have since faded.

Even without the tax cuts and higher defense spending, outlays are increasing at a relatively fast clip. Mandatory allocations, which include Medicare and social security payments, are growing amid an aging population and with one of the world’s least efficient health-care systems. Interest payments are also adding up, now comprising about 8.4% of total outlays.

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