US Annual Deficit Cut in Half while Risks Continue from Slowing Economy
The Biden administration said Friday that the federal deficit fell in half from the year before, as Washington girds for new battles over taxes and spending with interest rates rising and Republicans expected to take back at least one branch of Congress in the midterm elections, reports the Washington Post.
"Today’s joint budget statement provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan. It also demonstrates President Biden’s commitment to strengthening our nation’s fiscal health," Treasury Secretary Janet L. Yellen said in a statement. "President Biden’s recently enacted economic plan will build on the economic gains of the past two years."
"It is terribly disingenuous for the White House to take credit for reducing the deficit simply because temporary pandemic spending expired on schedule," said Brian Riedl, senior fellow at the Manhattan Institute, a libertarian-leaning think tank, and former chief economist to Sen. Rob Portman (R-Ohio). "Especially when they had helped drive up the deficit with the American Rescue Plan."
Biden aides tout plunging deficit as GOP prepares for spending fights (Washington Post)
According to Bloomberg, former Treasury Secretary Lawrence Summers said that policy makers in the US and elsewhere should heed the fiscal lessons from the UK’s recent crisis, and not assume Britain’s troubles were unique.
"That would be a real mistake" to conclude that other countries wouldn’t end up confronting similar challenges, Summers told Bloomberg Television’s "Wall Street Week" with David Westin. The first lesson from the UK is "that things can change extraordinarily fast."
Summers Warns on Deficit ‘Doom Loop’ Risk, Oil Price Spike (Bloomberg)
A cooling U.S. economy and rising interest rates could widen the federal budget deficit, potentially undercutting the White House’s message that a shrinking budget gap under President Biden shows fiscal responsibility in a time of high inflation, writes the Wall Street Journal.
"The consequence is that there’s not enough left in the revenue pie to fund the government’s ordinary spending…so deficits become higher in a way that’s difficult to escape," said Christina Skinner, an assistant professor at the University of Pennsylvania’s Wharton School.
Federal Deficit Shrank Last Fiscal Year, Could Widen as Economy Slows (Wall Street Journal)
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