US budget deficit soars to $2.24 trn in first 9 months of 2021

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The White House has unveiled a 6-trillion-dollar budget proposal for fiscal year 2022, drawing backlash from Republican lawmakers and budget watchers, reports Asian Lite News

The US budget deficit soared to $2.24 trillion during the first nine months of fiscal year 2021, which ends on September 30, the U.S. Treasury Department said.

Federal revenue for the nine-month period ending in June rose to $3.05 trillion, while total outlays rose to $5.29 trillion, driven by payments for jobless benefits and Covid-19 relief programs, according to the department.

Earlier this month, the Congressional Budget Office estimated that the US budget deficit for fiscal year 2021 would reach $3 trillion, close to the $3.13 trillion recorded in fiscal year 2020, which was the largest relative to the size of the economy since World War II.

The White House has unveiled a 6-trillion-dollar budget proposal for fiscal year 2022, drawing backlash from Republican lawmakers and budget watchers.

“As for the larger reconciliation package, the spending of an additional $3 trillion, $4 trillion, or even $6 trillion — without having seen enough credible revenue increases or spending cuts to pay for it – is deeply concerning,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a recent statement.

“With debt on track to reach a new record and the economy showing signs of recovery, any large-scale investments must not add to the debt and reconciliation instructions should add to zero,” MacGuineas said, adding policymakers should put the country on a sound fiscal path before debating how to pass trillion dollars in new policies.

“The budget process is spiraling out of control. We all know we need a better budget process, but a good start would be to follow the rules we currently have. This is not the summer to break the budget,” MacGuineas said.

US inflation hits 13-year high in June

Meanwhile, inflation hit a 13-year high in June, driven by a rise in the cost of used cars.

Consumer prices rose 5.4% in the 12 months to the end of June, up from 5% the previous month, the largest increase since August 2008.

The jump in prices will put pressure on the Federal Reserve to tighten monetary policy sooner than expected, which could in turn dampen a consumer-led recovery and drive demands for wage increases.

In its latest report, the US Labor Department released data showing that consumer prices rose 0.9% in June – more than economists expected – making it the largest monthly gain since June 2008.

Inflation has been rising as the economy reopens from coronavirus lockdowns, with a record 10.5% jump in the price of previously owned vehicles, according to the Bureau of Labor Statistics.

While consumer’s express confidence in the US economy, the latest figures will put pressure on Federal Reserve chair Jerome Powell to answer questions on the central bank’s concern about rising prices when he testifies before Congress on Wednesday and Thursday.

Minutes from its most recent policy meeting released last week showed that officials felt substantial further progress on the post-pandemic economic recovery “was generally seen as not having yet been met”.

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