The U.S. budget deficit this fiscal year will top $3 trillion as the federal government pours cash into the economy to save businesses and individuals from financial collapse. In fact, it may even hit $4 trillion with more bailouts and money pumping schemes brewing in the near horizon in attempts to keep equities and the economy from crashing.
We continue to note that Washington and the Federal Reserve will do all they can to keep propping up the stock markets, since the vast majority of the population, unaware of the current and future economic dangers, will only become aware of just how bad it is when the headlines read: “STOCK MARKET CRASHES!”
Fiscal Calamity
Tax revenues have cratered since state economies were shut down and businesses closed in March, while payments for unemployment and other safety-net programs have skyrocketed.
At the same time, hundreds of billions have been dumped into economic rescue programs.
Federal spending in June totaled $1.1 trillion compared to $342 billion in June 2019. About half of June’s outflow went into small business aid, the U.S. treasury reported.
June’s revenue was down 28 percent year-on-year to $241 billion, due in part to the Trump administration’s decision to roll back the income tax payment deadline to mid-July.
Normally, businesses and self-employed people make quarterly tax payments in June, giving federal coffers an influx of cash.
For the first nine months of the federal government’s current fiscal year, the deficit grew to $2.7 trillion, triple the sum for the same period last year. At the same time, revenues fell 13 percent as spending rose 49 percent.
Typically, deficits grow during recessions and shrink during expansions. But the U.S. deficit grew steadily through the expansive years leading up to the current crisis.
The 2017 federal tax cuts championed by Donald Trump and Congressional Republicans have added to the red ink.
The unemployment rate will end the year at about 10.5 percent, according to the Congressional Budget Office, compared to 3.5 percent in January.
The forecast has spurred Democrats in Congress to press for extending the $600 weekly federal unemployment benefit.
However, that benefit added to states’ unemployment insurance benefits boosts individual incomes above the median wage in all 50 states, a study from the American Action Forum found. That may discourage workers from looking for jobs until the federal grants run out.
TRENDPOST: The new round of stimulus spending promises to add at least another $1 trillion to this year’s deficit, sending more cheap money into the economy. Precious metals prices will rise higher as the dollar sinks lower.
TREND FORECAST: As unemployment rises sharply and more businesses go bust, tax revenues will continue to dramatically decline.
To make up for lost revenue, federal states and city governments will invent new schemes to siphon off more money in the name of taxes to keep politicians, bureaucrats, and civil servants employed.
This, in turn, will result in anti-tax movement and the formation of new political parties.
We also forecast a tsunami of cities going bankrupt, which will in turn destroy the ability to pay pensions, bond payments, etc.
