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U.S. Government Posts Widest Deficit Since 2012

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U.S. Government Posts Widest Deficit Since 2012

The U.S. government closed the 2018 fiscal year $779 billion in the red, its highest deficit in six years, as Republican-led tax cuts pinched revenues and expenses rose on a growing national debt, according to data released on Monday by the Treasury Department.

New government spending also expanded the federal deficit for the 12 months through September, the first full annual budget on the watch of U.S. President Donald Trump. It was the largest deficit since 2012.

The data also showed a $119 billion budget surplus in September, which was larger than expected and a record for the month. A senior Treasury official said the monthly surplus was smaller when adjusted for calendar shifts.

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Economists generally view the corporate and individual tax cuts passed by the Republican-controlled U.S. Congress late last year and an increase in government spending agreed in early February as likely to balloon the nation’s deficit.

Trump and his fellow Republicans have touted the tax cuts as a boost to growth and jobs.

“America’s booming economy will create increased government revenues – an important step toward long-term fiscal sustainability,” Office of Management and Budget Director Mick Mulvaney said in a statement accompanying the data.

The deficit in the 12 months through September was $113 billion – or 17 percent – bigger than in the same period a year earlier. Adjusting for calendar effects, the gap was even larger, the Treasury official said.

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The Bipartisan Policy Center called the report “a wake up call” for policymakers to turn things around. “The fact that our government is closing in on trillion-dollar deficits in the midst of an economic expansion should be a serious issue for voters and candidates,” William Hoagland, its senior vice president, said of next month’s U.S. congressional elections.

Much of the widening of the deficit came from more spending on interest payments on the national debt. Borrowing has increased over the past year, partially to make up for slower growth in tax revenues because of the tax cuts, while military spending has also risen.

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Adding debt servicing costs, the U.S. Federal Reserve is raising interest rates roughly once per quarter in the face of a hot labor market and some signs of inflation. Some Fed officials have warned that rising U.S. deficits could hamper any U.S. fiscal response to a downturn.

Trump has in turn criticized the Fed’s monetary tightening, saying last week that the central bank had “gone crazy.”

Business News

Boeing Shares Continue To Slide As Countries Ground 737 MAX Planes

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Boeing Shares Continue To Slide As Countries Ground 737 MAX Planes

Boeing shares have continued to slide on Tuesday as a growing list of countries move to ground the aircraft manufacturer’s 737 MAX model jets after the crash of an Ethiopian Airlines flight on Sunday killing a hundred fifty-seven persons.

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Boeing’s stock price has fallen nearly twelve percent since the accident, erasing roughly twenty-eight billion dollars in value amid concerns the accident could have links to last October’s crash of a 737 MAX 8 operated by Indonesia’s Lion Air. A hundred eighty-nine persons died in that one.

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Although experts warn that it’s too early to know what caused the Ethiopian Airlines crash, both crashes occurred shortly after takeoff. Experts say, that suggests a possible connection.

Bloomberg reports the Boeing 737 is the best selling aircraft in history.  The MAX is its newest version, with more fuel-efficient engines.  It is also generates almost one-third of the airline maker’s operating profit.

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SA Banks Stop Supply Of US Dollars To Zimbabwe

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SA Banks Stop Supply Of US Dollar To Zimbabwe

South African banks have stopped supplying Zimbabwe with U.S Dollar notes saying they want to avoid risk. They cite Zimbabwe`s loss of a hundred correspondent banking relationships in the past few years because of the country`s high risk rating.

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South African banks have been the major sources of U.S dollars for Zimbabwe since 2009.

Zimbabwe Reserve Bank Director, William Wanimanzi says the development is a result of the country`s failure to follow proper dollarization procedures, signs of which he said are now catching up with the country`s fragile economy. He said the country is not officially dollarized because it does not have an agreement with the United States government to use its currency. He says this will make it difficult to take in cash into the economy.

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Zimbabwe Central Bank Abandons Quasi Dollar

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Zimbabwe Central Bank Abandons Quasi Dollar

Zimbabwe Central Bank has abandoned the quasi dollar it introduced in 2016.  The peg of one Zimbabwe dollar to one US dollar has not worked as the black market rate has been in the range of three and a half to four Zimbabwe dollars to one U.S. dollar.

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Economists say this move could lead to jitters in countries that hold the peg, including Saudi Arabia and Hong Kong.

Zimbabwe has long been dealing with currency instability that in 2009, it introduced the US dollar, euro, and the South African rand as legal tenders it thought would stem the wild round of hyper-inflation.

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