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Newsweek: U.S. Budget Deficit Hits Record, Days After China Says It May Dump American Debt
Article by Christina Zhao in Newsweek
The U.S. Treasury Department on Friday said the budget deficit soared to a record high of $3 trillion through the first 11 months of this financial year. The announcement came just days after China indicated it may dump American treasuries if tensions between Washington and Beijing continued to escalate.
The deficit between October and August, worsened by coronavirus relief spending, more than doubles the previous all-time high shortfall of $1.37 trillion set in 2009. During that 11-month period, the federal government sunk large sums to generate movement out of the 2008 financial crisis and ensuing Great Recession.
More than $6 trillion has been spent this financial year—nearly $3 trillion on COVID relief—a figure double the $3 trillion generated from taxes. The imbalance is enormous compared to last year’s $984 billion. And with the budget year ending on September 30, the Congressional Budget Office forecasts that the deficit will increase to $3.3 trillion. With that, America’s debt will likely soon eclipse $26 trillion.
To make matters worse, China has threatened to dump its U.S. treasuries.
Beijing began diversifying its U.S. Treasury securities holdings in 2013—at a peak of $1.32 trillion. Now at $1 trillion, it’s still America’s second highest, following Japan’s roughly $1.2 trillion.
U.S. Central Bank Chair Jerome Powell told Washington in June that while this year’s spending is certainly “unsustainable,” we shouldn’t ….
To read this article in Newsweek in its entirety, click here.
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