The U.S. budget deficit hit a record high, days after China said it could cut U.S. debt

The U.S. budget deficit hit a record high, days after China said it could cut U.S. debt

The US Treasury Department said on Friday that the budget deficit had widened to $ 3 trillion in the first 11 months of this fiscal year. The announcement comes just days after China pointed out that tensions between Washington and Beijing could spill over into US treasuries if they continue to escalate.

The deficit between October and August was exacerbated by corona virus relief spending, doubling the previous high of $ 1.37 trillion set in 2009. During that 11-month period, the federal government sank huge sums of money to build the movement since 2008 due to the financial crisis and the Great Recession.

More than $ 6 trillion has been spent this fiscal year — almost $ 3 trillion on COVID relief — doubling the $ 3 trillion generated from taxes. The inequality is huge compared to last year 4 984 billion. With the budget year ending Sept. 30, the congressional budget office predicts that the deficit will widen to $ 3.3 trillion. With that, US debt will soon cross tr 26 trillion.

To make matters worse, China has threatened to cut off its US treasury.

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China recently announced a reduction in US debt.
Tilok Glycerin / Getty

Beijing began diversifying US Treasury bonds to $ 1.32 trillion in 2013. At $ 1 trillion now, it is the second highest in the United States, following Japan’s approximately $ 1.2 trillion.

Last week, The Global TimesA newspaper owned by the People’s Daily, the official publication of the Communist Party of China (CCP), said Beijing was “increasing the default risks of the federal deficit and could reduce its stake to about $ 800 billion as the Trump administration continues its blistering attack on China.” . “

Economists Global Times The article points out that if Washington imposes further sanctions on Beijing or if Trump mounts his increasing rhetoric against the Asian nation, blaming the epidemic, the withdrawal could be accelerated.

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The rapid release of $ 200 billion in securities will boost global financial markets and boost domestic interest rates. But the Chinese state media often make signal threats that they will not be bound by the Chinese Communist Party.

Said Shawn Breslin, professor of political and international studies at the University of Warwick in the UK Newsweek Such a move would “do a lot of harm in China as well, but it would not devalue anything they left behind.”

Newsweek Approached the U.S. Treasury Department for feedback.

US Federal Reserve Chairman Jerome Powell told Washington in June that while this year’s spending is certainly “unsustainable”, we should not focus on reducing the deficit given by the current epidemic.

Legislators in Congress are still paralyzed over another set of incentives to provide much-needed direct payments to Americans, as well as unemployment benefits and assistance to small businesses. Republicans proposed a $ 500 billion “skinny” bill this week that seeks trillions of dollars from Democrats.

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Cory Weinberg

About the Author: Cory Weinberg

Cory Weinberg covers the intersection of tech and cities. That means digging into how startups and big tech companies are trying to reshape real estate, transportation, urban planning, and travel. Previously, he reported on Bay Area housing and commercial real estate for the San Francisco Business Times. He received a "best young journalist" award from the National Association of Real Estate Editors.

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