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U.S. budget suffers a deficit of $3.1 trillion in 2020, as pandemic slams the economy

The U.S. budget deficit eclipsed $3.1 trillion in the fiscal year that ended Sept. 30.

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U.S. budget suffers a deficit of $3.1 trillion in 2020, as pandemic slams the economy, President Trump to decide fate of TikTok in 24-36 hours, Vaccine, America's Trump finally bans TikTok, WeChat, US imposes visa ban on Nigerians for election-related activities, I am not going to do second debate - Trump

The new White House data released evidently shows that the huge surge in spending to confront the economic fallout of the coronavirus pandemic fueled a historic increase in national debt; thereby, creating an unprecedented budget deficit.

According to the exclusive government data released on Friday, the U.S. budget deficit eclipsed $3.1 trillion in the fiscal year that ended Sept. 30. This is adjudged to be by far the biggest one-year gap in U.S history.

READ: Key highlights of the 2021 FGN budget

The data is a stark reflection of the staggering blow that the COVID-19 pandemic has dealt to the U.S. economy. The deficit – which is the gap between government spending and tax revenue – shows the dramatic surge in spending that the U.S. government approved, in order to contain the pandemic’s fallout earlier this year.

According to the data jointly released by the White House and the Treasury Department, the deficit last year was about $1 trillion, which represented an elevated level but pales in comparison to the 2020 tally. For 2020, the government spent $6.552 trillion, up from $4.447 trillion a year ago. The government brought in $3.420 trillion in tax revenue in 2020, a slight decrease from 2019.

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READ: Nigeria generates N1.29 trillion from taxes in Q2 2020, surpasses target

Backstory

Trump fell far short of his pledge to curb the national debt from the 2016 presidential campaign when he argued “We’ve got to get rid of the $19 trillion in debt.” He spearheaded a Republican effort to approve $2 trillion in tax cuts in 2017 and also worked with Congress to approve large spending increases in 2018.

What they are saying

According to Marc Goldwein, a Budget Expert at the Committee for a Responsible Federal Budget, which advocates for reducing the deficit, “Most of the increase in the deficit relative to last year is higher spending as a result of covid relief.”

READ: Nigeria allocates N3.12 trillion to service debt in 2021, as fiscal quagmire undermines ambitious recovery

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According to Angela Hanks, Deputy Executive Director of the Groundwork Collaborative, a left-leaning group,

“America’s failure to adequately stimulate the economy led to a tepid recovery from the Great Recession, and lawmakers should avoid making the same mistake again. Congress must still pass more spending to prevent people from going hungry or losing their homes.”

Brian Riedl, a Budget Analyst at the conservative-leaning Manhattan Institute, warned that America’s jobs recovery has already picked up the “low-hanging fruit” positions that were easy to bring back.

READ: Nigeria’s worsening current account deficit piles pressure on exchange rate

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Other jobs in sectors such as the hospitality, airline, and restaurant industry will be harder to bring back, particularly as the U.S. braces for an increase in coronavirus cases during the cold winter months. She added that “The growth is leveling off. The economic recovery is leveling off, which means the deficit numbers will continue to be pretty bad.”

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Why this matters

The new figures come as the White House and House Speaker, Nancy Pelosi, (D-Calif.), are locked in negotiations about another round of economic relief, which could include another $2 trillion in aid. Spending like this could further add to the government’s budget deficit.

READ: 2021 Budget: FG projects spending plan of N11.86 trillion and deficit of N5.16 trillion

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A range of Economic Experts across the political spectrum, including Federal Reserve Chairman, JH Powell, have said the assistance is necessary to prevent the economic recovery from flagging and keep millions from falling into poverty. Businesses have picked up the pace of layoffs in recent weeks, particularly at travel-related companies.

The optics

  • Numerous Republican lawmakers have bristled at the federal spending spree in response to the pandemic, and the surging deficit may fuel their reluctance to authorize additional relief.
  • Conservatives alarmed by the deficit may also push hard for its reduction, should Democratic Presidential nominee – Joe Biden, win the election. This will set the stage for a revival of the fierce budget battles that characterized much of the Obama administration.
  • Despite the increase of the deficit, economists and lawmakers from both sides of the political aisle have clamored for more government spending.
  • The bipartisan consensus that approved the big jump in spending earlier this year appears to have waned, and some Senate Republicans have signaled they are not comfortable with the big-spending package that the White House is now negotiating with Pelosi.

READ: ECOWAS: Single currency regime not kicking off in 2020  

What you should know

  • The government traditionally runs some sort of budget deficit, and it finances the gap between taxes and spending by issuing debt. Interest rates are low, which has made it relatively inexpensive to issue debt. But the debt totals have risen markedly during the Trump administration, even before the pandemic, upending his 2016 campaign vow to completely eliminate the debt over eight years.
  • The debt when Trump entered office was about $14.4 trillion. It now stands at around $21 trillion. The previous highest deficit recorded was in 2009, when it came in at $1.4 trillion. That is less than half of the 2020′s tally.
  • In March and April, Congress approved close to $3 trillion in spending programs, in response to the pandemic. This included hundreds of billion of dollars in aid for the unemployed and small businesses, as well as $1,200 stimulus checks for millions of Americans.
  • The economy fell into a steep recession earlier this year as many businesses shut down and sent workers home because of the virus outbreak.
  • The government’s spending imbalance skyrocketed in April and June as the government’s coronavirus relief efforts were implemented and the economy cratered. This is because the gap between federal spending and collected tax revenue grew to unprecedented levels. The monthly deficit jumped to $738billion for April alone, which was a record until the monthly deficit for June came in at $864 billion. The June deficit was bigger than the entire 12-month deficit in 2018.
  • Spending soared across government agencies this year. The Department of Education, for instance, spent 96 percent more than it had last fiscal year, while the Small Business Administration spent close to $600 billion more than prior years, due to its implementation of the Paycheck Protection Program for small businesses hurt by the virus.
  • Monthly deficits have since subsided somewhat, both as the pace of new government spending slowed and the U.S. economy began to bounce back and the unemployment rate fell, resulting in greater tax revenues. In August, the monthly federal deficit came in at $200 billion as the amount of federal spending was halved from June. But this decrease in spending has come amid signs that the economic recovery is slowing, which has prompted the White House and some lawmakers to consider more aid.

READ: Partey Deal: Arsenal records a whopping £67 million deficit in summer of 2020 transfer window

What to expect

On Wednesday, Trump told the New York Economic Club that reducing the federal debt would be a priority of his second administration, even as he urged Congress to spend more than $1.8 trillion on an additional relief package.

Trump also said faster economic growth would erase the U.S. debt burden. Although, budget experts say spending cuts or tax hikes would be necessary to do so.

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Johnson is a risk management professional and banker with unbridled passion for research and writing. He graduated top of the class with B.sc Statistics from the University of Nigeria and an MBA degree with specialization in Finance from Ambrose Alli University Ekpoma, with fellowships from the Association of Enterprise Risk management Professionals(FERP) and Institute of Credit and Collections management of Nigeria (FICCM). He is currently pursuing his PhD in Risk management in one of the top-rated universities in the UK.

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Appointments

Joe Biden appoints Nigerian-born Funmi Olorunnipa Badejo as Counsel

Nigerian-American, Funmi Olorunnipa Badejo has been appointed as a member of the office of the White House Counsel.

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U.S President-elect, Joe Biden, announced the appointment of Nigerian-American Funmi Olorunnipa Badejo as a member of the office of the White House Counsel, to serve as an Associate Counsel.

He announced it this week in a statement seen on his transition website.

A part of the statement reads:

  • “The Counsels are experienced and accomplished individuals, have a wide range of knowledge from various fields and will be ready to get to work on day one.”

What you should know about Funmi Badejo

  • Funmi Olorunnipa Badejo, before the announcement, was General Counsel of the House Select Subcommittee on the Coronavirus Crisis, chaired by House Majority Whip, James E. Clyburn.
  • Other government roles she has served include serving as Counsel for Policy to the Assistant Attorney General in the Civil Division of the U.S. Department of Justice, Ethics Counsel at the White House Counsel’s Office, and Attorney Advisor at the Administrative Conference of the United States during the Obama-Biden administration.
  • She started her career as an associate with the law firm of Manatt, Phelps & Phillips, LLP and was also a Legal Counsel at Palantir Technologies Inc.
  • She is a graduate of Political Science from the University of Florida, with a Master of Public Administration (MPA) from Harvard University and holds a Law Doctorate from the University of California School of Law.
  • She becomes the 3rd Nigerian American to be appointed under the Biden Government.

Biden’s transition committee said the new Counsels would work under the direction of White House Counsel, Dana Remus, and “help restore faith in the rule of law and the accountability of government institutions.”

In case you missed it

  • Nairametrics reported last month that United States President-elect, Joe Biden, selected a Nigerian-born attorney, Adewale Adeyemo, as the Deputy Treasury Secretary.
  • Osaremen Okolo, 26, was also appointed as COVID Policy Advisor and a member of the COVID-19 Response Team.

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Around the World

Suspending Trump was the right decision but sets dangerous precedent – Twitter CEO

Twitter CEO, Jack Dorsey has reacted to the permanent suspension of Donald Trump from the social network site.

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Twitter shows interest in buying TikTok, Twitter warns political figures to abstain from fake, misleading statements  

Jack Dorsey, the CEO and founder of Twitter, said that the decision to ban Donald Trump from the social network was the right decision, but one that sets a dangerous precedent.

Jack Dorsey disclosed this in a statement on Thursday morning.

He said:

  • I do not celebrate or feel pride in having to ban Donald Trump from Twitter, or how we got here. After a clear warning we’d take this action, we made a decision with the best information we had based on threats to physical safety both on and off Twitter. Was this correct?”
  • “Banning Trump was the right decision as Twitter faced an extraordinary and untenable circumstance, forcing us to focus all of our actions on public safety. Offline harm as a result of online speech is demonstrably real, and what drives our policy and enforcement above all.”

He disclosed that banning an influential account has significant ramifications, citing it as a failure of Twitter to promote healthy conversation and a time to reflect on its operations.

He added that taking actions to limit influential people like Trump fragments public conversation, limits the potential for clarification, redemption, learning, and sets a precedent I feel is dangerous – the power an individual or corporation has over a part of the global public conversation.

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He disclosed that Internet companies engaging in censorship can and over the long term, be destructive to the noble purpose and ideals of the open internet.

  • “A company making a business decision to moderate itself is different from a government removing access, yet can feel much the same. I believe the internet and global public conversation is our best and most relevant method of achieving this. I also recognize it does not feel that way today. Everything we learn in this moment will better our effort, and push us to be what we are: one humanity working together.”

What you should know 

  • Nairametrics reported last week that Social Media Network, Twitter permanently suspended U.S President, Donald Trump, citing the risk of further incitement of violence.
  • Twitter saw its shares drop as much as 8.5% at the start of Monday’s trading session on the New York Stock Exchange.

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Trump impeached the second time by US congress as 10 Republicans vote against him

The US House of Representatives has impeached President Trump for the second time in two years.

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Donald Trump, on Wednesday, became the first President in US history to be impeached twice, when the House of Representatives voted to charge him with inciting an insurrection in last week’s violent attack on the Capitol.

Unlike the impeachment in December 2019, the ranks of the Republicans were broken with 10 of the President’s party members joining the Democrats to get him impeached.

READ: US Supreme court dismisses Texas bid to overturn presidential election results

The vote that took place in the Democratic-controlled House was 232-197 following the deadly assault on American democracy, although it looks unlikely that the swift impeachment would lead to Trump’s removal before his 4-year term ends and Democratic President-elect Joe Biden is inaugurated on January 20.

The Senate’s Republican majority leader, Mitch McConnell, rejected the call by Democrats for an immediate impeachment trial, saying there was no way to conclude it before Trump left office. But even after he leaves the White House, a Senate conviction of Trump could lead to a vote on banning him from running for office again.

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READ: Mike Pence to go against Trump, announces he will attend inauguration

After losing the presidential election to Joe Biden, Trump, instead of accepting the results, inspired a violent and conspiracy-fueled attack on the Capitol, while calling the election fraudulent.

The congress had passed a single article of impeachment, a formal charge, accusing Trump of “incitement of insurrection,” with the speech he delivered to thousands of supporters shortly before his supporters attacked the Capitol, with the intention of disrupting the formal certification of Biden’s electoral victory over Trump.

READ: Facebook suspends Donald Trump indefinitely

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Thousands of armed National Guards in full camouflage with rifles were seen assembled at the Capitol as the impeachment debate went on in the congress.

House Speaker, Nancy Pelosi, on the floor of the house before the vote, said, “The president of the United States incited this insurrection, this armed rebellion against our common country. He must go. He is a clear and present danger to the nation that we all love.”

READ: Twitter drops 8.5% in early trading over President Trump ban

At a later ceremony, she signed the article of impeachment before it was sent to the Senate, saying she did it “sadly, with a heartbroken over what this means to our country.”

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In reaction to the development, Trump on Wednesday asked his followers to remain peaceful, saying in a statement: “I urge that there must be NO violence, NO lawbreaking and NO vandalism of any kind. That is not what I stand for, and it is not what America stands for.”

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READ: Banking giant, Deutsch Bank to cut ties with President Trump

What this means

  • With the impeachment of the President in the Congress, the process will now move to the Senate where, under the US Constitution, impeachment in the House triggers a trial in the Senate. A two-thirds majority would be needed to convict and remove Trump, meaning at least 17 Republicans in the 100-member chamber would have to join the Democrats.
  • However, McConnell does not expect any trial to begin until the Senate returns in regular session on January 19, a day before Biden’s inauguration. The trial would proceed in the Senate even after Trump leaves office.

READ: Nigeria’s total public debt increases by N6 trillion in 1 year

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What you should know

  • It can be recalled that Congress previously impeached Trump in December 2019 on charges of abuse of power and obstruction of the House due to his request that Ukraine should investigate Biden and his son, Hunter ahead of the election, as Democrats accused him of soliciting foreign interference to smear a domestic political rival.
  • However, the Senate in February 2020 voted to keep Trump in office.
  • While addressing his supporters on January 6, Trump falsely claimed he had defeated Biden, repeated unfounded allegations of widespread fraud and irregularities in a “rigged” election, and urged them to stop the steal, show strength and fight much harder.

READ: Google, Facebook, Twitter stocks drop, investors ponder if big techs have become too powerful

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