Cold thoughts on the upward adjustment of the US budget deficit estimate

On June 18th local time, the Congressional Budget Office (CBO) raised its forecast for the US fiscal year 2024 deficit, predicting a 27% increase in the US deficit rate to 7%, or $1.9 trillion, an increase of 1.4 percentage points from February's forecast, to approximately $400 billion.

It is reported that according to the breakdown of income and expenditure items, it can be found that during the election year, the Biden administration expanded the scale of medical insurance coverage, introduced student loan reduction plans, and increased foreign aid expenditures, which were the main reasons for the increase in the US deficit this year.

The significant increase in the US fiscal deficit forecast by CBO has quickly attracted widespread attention and discussion. This change not only has a profound impact on the economic and fiscal situation of the United States itself, but also has caused significant waves in the global economic landscape.

The increase in budget deficit reflects the severe challenges faced by the US government in terms of fiscal revenue and expenditure. On the one hand, the increasing demand for expenditure has led to a sustained increase in fiscal pressure. The investment in social welfare, defense spending, infrastructure construction and other fields is constantly increasing, while the growth of government revenue is relatively lagging behind. On the other hand, the uncertainty of the economic situation, adjustments to tax policies, and the burden of debt interest have further exacerbated the expansion of the deficit.

This phenomenon has had multiple impacts on the domestic economy of the United States. A high budget deficit may lead to increased inflationary pressure. When the government compensates for the deficit through borrowing, the increase in money supply may trigger price increases, weaken consumer purchasing power, and thus affect stable economic growth. At the same time, the growing debt scale will increase the burden on future generations, limiting the government's long-term investment ability in key areas such as education and healthcare, posing a potential threat to social development and improving people's livelihoods.

In the financial market, the increase in budget deficit estimates may cause investors to shake their confidence in US treasury bond bonds. The yield of treasury bond may rise, leading to an increase in financing costs, which not only puts forward higher requirements for the government's solvency, but also has a chain reaction on the borrowing costs of enterprises and individuals. This may inhibit investment and consumption, affecting the stability of financial markets and the vitality of capital markets.

From a global economic perspective, the United States, as the world's largest economy, has spillover effects from changes in its budget deficit. The international status of the US dollar has a significant impact on the global currency market and exchange rate stability due to the US fiscal situation. The expansion of the deficit may lead to the depreciation of the US dollar, causing global exchange rate fluctuations and affecting the normal order of international trade and finance. In addition, the US treasury bond bond is an important asset in the global financial market. The change of its risk may lead to the reallocation of international capital flows and impact on the financial market and economic stability of other countries.

However, facing the upward adjustment of budget deficit estimates, the United States is not completely helpless. The government can improve its fiscal situation by implementing effective fiscal policies and structural reforms. For example, optimizing expenditure structure, reducing unnecessary expenses, and improving the efficiency of using fiscal funds; Reform the tax system, expand the tax base, and increase fiscal revenue; Promote economic structural adjustment, promote industrial upgrading, improve the quality and efficiency of economic growth, and thus enhance the sustainability of finance.

For the international community, countries should closely monitor the changes and impacts of the US budget deficit, strengthen policy coordination and international cooperation. To jointly address the challenges facing the global economy, maintain the stability of international financial markets, and promote the healthy development of the world economy.

In summary, the upward adjustment of the 2024 US budget deficit estimate is a complex and severe issue that requires the US government to take decisive and effective measures to address. At the same time, the international community should remain vigilant and work together to reduce its potential negative impact and achieve global economic stability and sustainable development.