According to The Treasury Department, the U.S needs to borrow $300M dollars this week.
Uncle Sam needs to borrow a ton of money this week — in the middle of a fight with its biggest creditor.
The United States plans to sell about $294 billion of debt, according to the Treasury Department. That’s the highest for a week since the record set during the 2008 financial crisis.
Federal revenue is declining because of President Trump’s tax cuts, so the government needs to borrow more to make ends meet. At the same time, Washington’s borrowing costs have climbed rapidly in recent months.
“The amount of debt coming on the market this week is extremely large,” said Rick Rieder, global chief investment officer of fixed income at BlackRock, the world’s largest asset manager.
The government is auctioning all this short- and longer-term debt at an awkward time. Last week, Trump vowed to impose wide-ranging tariffs on China, which owns of more Treasury bonds than any foreign country.
China responded by saying it would fight any trade war “to the end.” When asked by Bloomberg Television whether China was considering scaling back purchases of US debt, China’s ambassador to the United States said, “We are looking at all options.”
China holds $1.17 trillion of US debt. It trimmed those holdings by 1.4% between December and January, the latest data show.
“We do rely on international investors in Asia for a good deal of our Treasury funding. And that is something a lot of eyes are focused on now,” Rieder said.
Related: Wall Street’s head-spinning reaction to trade headlines
Guy LeBas, chief fixed income strategist at Janney Capital, played down concerns about China “abandoning” purchases of US debt.
After all, one reason Beijing owns so many Treasuries is because of a huge trade surplus: China sells more goods and services to the United States than it buys, and it has to do something with all that cash. China chooses to invest in safe assets, like US debt.
“We pay China in dollars for whatever they import to the US. They could take the dollars and hoard them, but that’s not a particularly economical exercise,” LeBas said.
CNN tries to paint this as an attack on Trump’s Tax Cuts. They open the article stating that Trump’s Tax cuts are to blame but that is misleading.
Tax Cuts: The latest monthly Treasury report on taxes and spending shows that gross tax receipts in February were $1.4 billion higher than the year before. Weren’t the Republican tax cuts supposed to explode the deficit?
According to the report, the government took in $238.2 billion in taxes in February. The year before, tax revenues were $236.8 billion.
For fiscal year 2018, which started last October, taxes are up $50.5 billion compared with the same months last year, and are at a record high level for this five-month span.
The report does show that net receipts were lower in February compared with last year, but the main reason is that individual income tax refunds jumped $13.3 billion, while corporate tax refunds went up $4 billion, neither of which is the result of the tax cuts that took effect in January.
Even so, net receipts are up by $29.6 billion for the current fiscal year — a 2.4% increase — compared with the same period last year. That’s also a record high. (See nearby chart.)
Does this mean tax cuts are “paying for themselves”?
Not exactly. Income taxes collected in February were down $2.5 billion from last year — reflecting the new withholding tables. Corporate income tax collections, however, were essentially flat.
But remember, income taxes are hardly the only source of revenue for the federal government. And a faster-growing economy means more money pouring in from these other sources.
Payroll taxes, for example, are dependent on the number of people working and their wages. In February, the economy added 313,000 jobs, unemployment levels are now at or near record lows, and wages are climbing.
As a result, payroll taxes brought in $1.5 billion more in February than they did last year, and are up $11.4 billion this fiscal year. Federal excise taxes and customs duties are up $3.8 billion and $1 billion, respectively, this fiscal year.
So as you can see Tax Cuts aren’t the issue it is, in fact, the spending that is the issue. The bottom line is that the Federal Government spends to much money and since neither party seems very inclined to stop spending we are continuing to run up deficits and then debt. No reasonable amount of Taxation can cope with this level of spending.