Fiscal Balance in USA
USA - Fiscal Balance
Congress approves unprecedented USD 2 trillion coronavirus stimulus deal in March
After days of heated negotiations, U.S. policymakers passed a historic stimulus package on 27 March amounting to roughly USD 2 trillion (close to 10% of GDP), in efforts to combat the severe economic fallout from the coronavirus pandemic. The major facets of the spending plan are direct transfers and expanded unemployment benefits for American individuals and families, financial assistance to embattled sectors, loans to small businesses, and funding for hospitals. The deal follows the approximately USD 100 billion bill passed in mid-March, which expanded funds for food programs, Medicaid and paid leave, and the early March USD 8 billion package, which included measures for vaccine research and free virus testing. Although the massive fiscal stimulus should provide some relief, it will ultimately not be enough to fully offset widespread damage and may not go far enough for businesses or households when factoring elevated corporate and household debt into the equation.
The USD 2 trillion package is broken down into three main components. The first deals with relief for American households and includes direct deposits of USD 1,200 to individuals earning USD 75,000 or below and an additional USD 500 per child and smaller payouts for incomes above that threshold. In addition, the plan also expands jobless benefits, providing 13 extra weeks of unemployment pay, and extends the benefits to gig workers and freelancers. The second major feature of the package deals with economic relief for companies. It provides a USD 500 billion lending program for companies in struggling sectors—with USD 60 billion earmarked for a bailout of commercial airlines, which have reeled in the wake of travel restrictions worldwide—and an additional USD 350 billion in federally guaranteed loans to small businesses. Third, the package allocates USD 100 billion in direct funding for hospitals severely impacted by the virus.
Commenting on the effectiveness of the stimulus, Leslie Preston, senior economist at TD Economics, noted that the measures will “do little to boost near-term demand, and as such won’t boost our near-term estimate of GDP growth”. That said, looking further ahead, Preston went on to say that: “it will help ensure that there are more businesses to spend money at once the pandemic subsides. […] This should help ensure that the U.S. economy is able to bounce back more readily once the worst of the pandemic passes and social distance measures come to an end.”
Despite the recent passage of this fiscal package, lawmakers are already expecting to introduce another round of stimulus in the coming weeks or months. Given the looming slump in economic activity, coupled with the size of the fiscal package, the budget deficit will widen markedly this year, with FocusEconomics panelists now projecting a shortfall well above 5% of GDP. Moreover, public debt is expected to reach 115% of GDP.
Addressing the implications for the fiscal deficit, James Knightley, chief international economist at ING, noted:
“In arguably the most benign case whereby the economy contracts around 3%, that still implies a fiscal deficit of around 12% of GDP. A deeper, more prolonged economic dislocation that requires significantly more fiscal support can quickly get you up to a fiscal deficit well in excess of 20% of GDP. This truly is comparable with wartime. Unfortunately, the demographic situation will make lowering deficits and debt levels much more challenging relative to post World War 2.”
FocusEconomics Consensus Forecast panelists see the fiscal deficit widening to 7.6% of GDP in 2020, which is down 2.9 percentage points from last month’s estimate, and project a fiscal shortfall of 7.4% in 2021.
United States - Fiscal Balance Data
|Fiscal Balance (% of GDP)||-2.8||-2.4||-3.1||-3.4||-3.8|
5 years of economic forecasts for more than 30 economic indicators.
United States Facts
|Bond Yield||1.92||-0.43 %||Dec 31|
|Exchange Rate||1.12||0.65 %||Dec 31|
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May 15, 2020
Write intro here Nominal retail sales declined at the sharpest rate in the series’ near three-decade history in April, falling 16.4% in month-on-month seasonally-adjusted terms.
United States: Labor market endures record 20.5 million job losses; unemployment hits record high in April
May 8, 2020
Total non-farm payrolls fell by 20.5 million in April, plunging at the sharpest rate since the series began in 1939 as the labor market reels from the Covid-19 pandemic and measures to halt its spread.
May 1, 2020
The Institute for Supply Management (ISM) manufacturing index fell to 41.5 in April from 49.1 in March, marking the lowest level in 11 years.
April 29, 2020
The economy shrank at the sharpest rate since Q4 2008 in the first quarter as the pandemic and measures to contain it hammered activity.
United States: Fed stresses commitment to deploying full arsenal to support ailing economy at April meeting
April 29, 2020
At its 28–29 April meeting, the Federal Open Market Committee (FOMC) held the target range for the federal funds rate at its effective floor of 0.00%–0.25%.