All articles tagged with #budget tax and economy
Treasury Secretary Scott Bessent told lawmakers the department is exploring a deficit-free way to deliver a $5,000 dividend to Americans, potentially through executive action or a congressional authorization, with an estimated cost of about $1.3 trillion if pursued, and without disclosing funding specifics.
Friday’s inflation report is pivotal as renewed Middle East conflict pushes energy costs higher. Economists expect headline inflation to ease to about 3.3% year over year, with core inflation around 0.2% month over month, but surging oil and gas prices could lift overall prices again. The Federal Reserve remains split on a rate hike next week, while longer‑term yields rose on inflation fears, underscoring heightened borrowing costs amid a sensitive economic and political backdrop ahead of the midterms.
U.S. producer prices rose 0.4% in August, in line with economists’ expectations, with the core PPI up 0.2% as food and energy were excluded. Year-over-year PPI climbed 5.4% and core PPI 4.6%. The data precede Friday’s CPI report, which analysts expect to show a monthly uptick but again a similar year-over-year pace, keeping scrutiny on inflation. Markets are pricing roughly a 64% chance of a Fed rate hike in September and about 90% by December, aided by hawkish signals from Fed officials.
South Korea unveiled its biggest-ever 2027 budget at 821 trillion won (~$597 billion), a 12.8% year‑on‑year rise funded by a windfall from Samsung and SK Hynix profits, with heavy spending to boost AI capability and next‑generation chip infrastructure. Tax receipts are expected to surge, helping reduce the debt‑to‑GDP ratio to about 48.3% from an estimated 51.6%, while net bond issuance is set to fall and excess tax revenue will be parked in a Future Response Fund for long‑term investments; parliamentary approval is still required.
The US debt picture worsened as annual interest payments climb to a record $1.25 trillion, equaling about 18.5% of federal revenue (the highest since 1991). With debt service consuming roughly one-fifth of government revenue, the fiscal burden could crowd out other programs and limit policy flexibility, while rising Treasury yields contribute to the surge.
U.S. inflation remained above the Fed’s 2% target in July, with the PCE price index up 3.7% year over year and core PCE at 3.3%, while spending cooled modestly and incomes rose faster than prices. BEA data showed durable goods orders rebound and corporate profits surge, and second-quarter GDP growth was left at 1.5% but with consumption revised up to 3.4% and private sales strengthening to 4.2%, signaling stronger private demand and a possible ~3% pace for Q3. The mixed signals keep the Fed focused on inflation, with markets pricing about a 40% chance of a rate hike in September as tariffs and geopolitical tensions continue to influence price pressures ahead of Jackson Hole.
With the U.S. debt reaching $40 trillion, Trump argues the economy can grow its way out of the problem, but Kent Smetters of the Wharton School calls the notion a “fantastic story” that isn’t realistically feasible. The debt-to-GDP ratio sits around 122%, and major entitlement costs (Social Security, Medicare, Medicaid) and political constraints limit any growth-driven fix. Bond-market signals and unscheduled Treasury buybacks highlight looming risks, while policymakers debate deficit reduction or commissions. Economists emphasize that a credible, broad-based plan—not growth alone—is needed to address the debt, even as AI-driven investment fuels near-term expansion and midterm politics heighten attention to fiscal policy.
Treasury officials have rolled out buybacks and other tools to calm a selloff in long-dated Treasurys, but long-term yields remain elevated and market skeptics say liquidity moves don’t tackle the underlying rise in the national debt. With deficits ballooning and the government needing to finance growing borrowing, more measures are likely, even as tensions between the Treasury and the Fed – including expectations set for Jackson Hole – shape how policy is priced into markets and influence borrowing costs across mortgages, cars, and other loans.
President Trump pressed the Fed to cut rates, calling it ‘Rocket Fuel’ for growth, but borrowing costs have climbed as the Iran conflict boosts energy prices and inflation. The 10-year yield surpassed 4.7% and 30-year mortgage rates sit around 6.6%, squeezing households and lifting debt service as the government nears $827 billion this year. Fed chair Kevin Warsh says inflation remains hot, and markets expect little relief before the September meeting, complicating Trump’s economic messaging ahead of elections.