Record of decrease in US budget, the day after China says

The US Treasury Department said on Friday that the budget deficit reached a record high of $ 3 trillion in the first 11 months of this fiscal year. A few days after the announcement, China indicated it could dump the US treasury if it continued to escalate tensions between Washington and Beijing.

The deficit, worsened by coronovirus relief spending between October and August, more than doubled from the previous all-time high of $ 1.37 trillion in 2009. During that 11-month period, the federal government sunk large sums of money to generate agitations outside of 2008. Financial crisis and ensuing recession.

More than $ 6 trillion has been spent this fiscal year – about $ 3 trillion on COVID relief – double the $ 3 trillion figure generated from taxes. The imbalance is substantial compared to last year’s $ 984 billion. And with the budget year ending on September 30, the Congressional Budget Office estimates the deficit will increase to $ 3.3 trillion. With this, US debt is likely to eclipse $ 26 trillion soon.

To make matters worse, China has threatened to dump its US funds.

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China recently announced that it would dump US debt.
Dilok Claustaporn / Getty

Beijing began diversifying its US Treasury securities holdings in 2013 — at a peak of $ 1.32 trillion. Now at $ 1 trillion, it is still the second-highest position in the US, after Japan at about $ 1.2 trillion.

last week, Global TimesThe official publication of the People’s Daily-owned newspaper, the Communist Party of China (CCP) —sayed Beijing has widened its holdings to nearly $ 800 billion as the US “federal deficit increases the risk of default and the Trump administration over China Continues his hot attack. ” . ”

Economist in Global Times The article stated that the withdrawal could be hastened if Beijing imposes further sanctions on Beijing or prohibits its growing rhetoric against the Asian nation, which it attributes to the epidemic.

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Accelerated discharge of US $ 200 billion of securities will accelerate global financial markets and increase domestic interest rates. But, Chinese state media often threaten signs that CCPs are not bound.

Sean Breslin, professor of politics and international studies at the University of Warwick in Britain, told Newsweek Such a move would “have many detrimental effects on China as well, at least not collectively reducing any value left by them.”

Newsweek Reached the US Treasury Department for comment.

US Central Bank Chairman Jerome Powell told Washington in June that while this year’s spending is certainly “uncertain”, we should not focus on reducing the deficit given the current epidemic.

Lawmakers in Congress are still deadlocked over another stimulus package that would provide Americans with much-needed direct payments, further unemployment benefits and assistance for small businesses. Republicans this week proposed a $ 500 billion “skinny” bill, which was quickly stalled by Democrats seeking trillions.