–Fiscal Year to Date Deficit -$747 Bln; Outlays/Receipts Records
–No New Guidance on Debt Limit X-Date; Still Late Summer
WASHINGTON (MaceNews) – The June U.S. budget deficit was only $8 billion – until adjustment for shifted benefit payments that boosted it to $55 billion, on the way to what the White House expects will be a full trillion dollars in new 2019 debt by the Sept. 30 end to the government’s fiscal year.
With three-fourths of the fiscal 2019 results in, the official additional debt total through June announced Wednesday is $747 billion, with the White House estimate of a year-end trillion dollar total of fresh red ink seemingly within reach. The Congressional Budget Office has been a little more optimistic, seeing the return to trillion-dollar-a-year deficits waiting until next year.
The difference in the formal deficit figure and the adjusted total was exceptionally wide in June, because with benefit payments shifted to May – June 1 was a Saturday – $55 billion in outlays switched months. There were other timing factors at work as well.
Corporate tax collections jumped in June, a payments month, making the year-to-date total net of refunds a positive number again. Individual tax receipts, again net of refunds, have been growing a lot faster, up $63 billion through June. Treasury says with more people working and unemployment low, withholding tax receipts are greater. Critics of the 2017 tax cut say it is making the national debt balloon while mostly benefiting the wealthy.
The category of customs duties, including tariff collections on imports from China and other targets of the Trump administration, keep turning in double-digit increases, up $52 billion or 78% so far this fiscal year. Tariffs are paid by the importing country, in this case, the U.S., while making the exports of the target country less competitive.
Senior Treasury officials offered no update to the May 23 advisory to Congress on the outlook for exhaustion of all borrowing capacity, sticking with the late summer outlook, at least until the Treasury secretary sends an updated letter.
Using its “extraordinary measures,” Treasury has conserved its borrowing capacity by stopping investment in two government pension funds and the so-called G Fund, and suspended the special Treasury securities created for the muni industry nicknamed SLUGS.
The timing of when Treasury must stop borrowing is important because if the government hits the debt limit wall in mid September, it will require action from Congress separate from the action required by the Sept. 30 deadline for an operating budget, a fiscal crisis overload. Many lawmakers hope both measures can be dealt with in one piece of legislation as in the recent past.
Earlier in the day Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee, warned the Fed cannot shield the government from the extremely dire consequences of any default, which would hit market and business confidence worldwide, should the borrowing limit not be raised. He’s repeatedly said it is “unthinkable” that Congress would not raise the limit in time. Markets are not more disturbed by the prospect, he said, since it is assumed the deadline will be met as it always has been in the past.
On Capitol Hill, however, there are early signs of another fiscal and debt policy impasse that threatens not only the specter of government default but still another government shutdown, either because of the debt limit or the budget deadline Sept. 30.
Powell also warned that in order to preserve the dollar’s precious status as the world’s reserve currency, the nation will have to have a sustainable fiscal policy which he said it does not have now. For the time being, though. since there is no competitor currency that offers the stability of the dollar, the reserve currency status is safe, he said.
Among the most unappreciated benefits of the decades of U.S economic dominance, reserve currency status allows the United States to avoid having to translate its cross-border dollar spending into another currency, as does every other nation. Powell said that insulates the U.S. from market pressures to a large extent, a privilege that would be squandered should fiscal policy realities continue to deteriorate The U.S. is borrowing what’s becoming a trillion dollars a year for short-term consumption spending, he said.