Has the Peak of US Fiscal Expansion Passed? ... August Fiscal Deficit at 306 Trillion Won

(Photo by Reuters)

[Asia Economy Reporter Yujin Cho] The U.S. federal government's fiscal deficit for August reached $220 billion (approximately 306 trillion won), a 29% increase compared to the same period last year ($171 billion), the U.S. Treasury Department announced on the 13th (local time).

The Treasury reported that expenditures last month rose 19% year-on-year to $523 billion, while revenues increased by 13% to $304 billion.

The increase in spending on medical services and interest on government bonds were identified as factors contributing to the expansion of the fiscal deficit.

Medicare spending, the federal health insurance program for the elderly, increased by $50 billion (153%), and education spending rose by $19 billion (127%). As the U.S. Federal Reserve (Fed) accelerated interest rate hikes to curb the worst inflation in 40 years, interest on government bonds increased by $30 billion (53%).

Based on the fiscal year starting in October last year, pandemic-related spending decreased and tax revenues increased over 11 months, reducing the fiscal deficit significantly from $1.8 trillion to $946 billion.

The Congressional Budget Office (CBO) estimated that without new spending on student loan relief, this year's fiscal deficit would be limited to $1 trillion.

However, the CBO added that significant uncertainty remains as the costs related to the Biden administration's student loan forgiveness plan had not been reflected through August.

Despite active fiscal expansion, inflationary pressures persist. The Consumer Price Index (CPI) for August, released on the same day, exceeded expectations, raising concerns about prolonged high inflation.

According to the U.S. Department of Labor, the August CPI rose 8.3% compared to the same period last year, surpassing the market expectation of 8.0%.

On a seasonally adjusted basis, the CPI increased by 0.1% month-over-month, contrary to the expected 0.1% decline. In July, the month-over-month increase was flat (0.0%).

The core CPI, which excludes volatile food and energy prices, rose faster than both the previous month and expectations, heightening concerns that inflationary pressures may persist long-term.

This content was produced with the assistance of AI translation services.