All articles tagged with #deficits
The Senate reconciliation package could add approximately $3.3 trillion to the national debt over 10 years, surpassing the House's estimate, and may result in nearly 12 million more uninsured Americans by 2034, according to the Congressional Budget Office.
The US government is set to test the appetite for its debt with auctions of $164 billion scheduled for this week. Concerns are rising that the market may struggle to absorb the flood of securities, as US debt and deficits continue to increase. The auctions come ahead of the US Federal Reserve Board's Open Market Committee meeting, where projections for the US economy and indications of future rate cuts will be closely watched. The changing nature of prospective buyers and the withdrawal of demand from the Federal Reserve and offshore investors have increased the reliance on US domestic investors to fill the gap. However, if demand weakens, the US may have to pay a premium to attract buyers, leading to higher interest costs and a larger deficit. Ultimately, the US will need to address its finances and reduce deficits to avoid potential financial stress in the bond market.
While Federal Reserve Chair Jerome Powell is expected to hold interest rates steady, the US government's continued borrowing at higher rates will fuel deficits and debt, putting pressure on President Joe Biden and Democrats to reduce deficits. Political dysfunction is cited as a reason for pessimism about the fiscal outlook. The US Treasury's borrowing plans have come into focus as the government faces the possibility of a shutdown. Rising yields are also attributed to the mechanical reaction of more supply and fewer buyers, as the Fed shrinks its holdings of Treasury securities. The Fed's moves and the fiscal outlook are linked, and if rates stay high, it could slow economic activity. The resilience of the economy will determine the outlook for inflation and how long rates will remain high.
Goldman Sachs predicts that record oil demand will lead to significant deficits in the second half of 2023, driving crude prices higher. The bank expects demand to reach an all-time high, resulting in deficits of nearly 2 million barrels per day in the third quarter. Despite the increase in U.S. crude oil production, Goldman Sachs anticipates a slowdown in growth throughout the rest of 2023. The lack of agreement at the G20 energy ministers' meeting highlights the uncertainty surrounding long-term oil demand. Investors may require a premium to compensate for the elevated risk caused by this uncertainty.
The US debt has increased by $246 billion in just 13 days, reaching a total of $32.246 trillion, according to the Treasury Department. The Congressional Budget Office warns that US deficits are expected to continue rising, with federal debt reaching 98% of GDP by the end of 2023 and surpassing its historical high of 107% by 2029. The high and increasing debt levels pose risks to economic growth, interest payments, and the fiscal outlook, potentially limiting policy choices for lawmakers. The US deficit is projected to reach 10% of GDP by 2053, a level only seen during World War II and the recent surge in government spending in 2020.
The Congressional Budget Office projects that the US public debt will reach a record 181% of American economic activity by 2053, compared to a projected 98% at the end of this budget year. The higher debt load is a result of deficit spending and increasing dependence on debt to fund various programs. While annual deficits after 2042 are lower than previously forecasted, lawmakers will face constraints as spending increases, driven by healthcare and Social Security costs. Revenues are expected to increase after 2026, but the preservation of tax cuts and disagreements between the White House and GOP could lead to lower revenues than anticipated.