U.S. Budget Deficit Surges to a Record $864 Billion
The United States budget deficit grew to a record $864 billion in June as the federal government continued pumping money into the economy to prop up workers and businesses affected by the coronavirus pandemic, the Treasury Department said on Monday.
The deficit was driven largely by government spending related to the Paycheck Protection Program, which by the end of June had approved more than $500 billion loans to support small businesses. Over all, government outlays topped $1.1 trillion dollars last month, while receipts were down sharply as a result of tax payments that have been deferred until mid-July.
The monthly deficit was the largest since April, when it hit a record gap of $738 billion. For the fiscal year to date, the government is generating red ink at a record clip. So far in fiscal 2020, the deficit is $1.99 trillion, a 267 percent increase from 2019.
The figures underscore the deep fiscal hole facing the United States as it copes with a pandemic that has thrown millions of people out of work and shuttered businesses, resulting in a surge of bankruptcies around the country.
The swelling deficit, while expected, could further complicate talks for another rescue package given Republicans’ concerns about the financial tab. Lawmakers are preparing to resume negotiations over another round of fiscal support as the virus remains resurgent in many parts of the United States.
Trump administration officials have been calling for a payroll tax cut, a capital-gains tax holiday, additional targeted relief to industries that have been hit hardest by the pandemic — such as travel and tourism — and another round of stimulus checks.
The next bill could cost $1 trillion to $3 trillion.
KFC, the fried chicken chain, closed dining rooms in all 40 of its corporate-owned restaurants in Florida on Monday as coronavirus cases in the state continued to skyrocket.
The company encouraged franchisees operating stores in Florida and other virus “hot spot states” such as Arizona, California and Texas to follow suit. Corporate-owned locations in Florida will continue to offer drive-through, carry out and delivery where available.
“This guidance is part of our continued efforts to prioritize the health of our team members, customers, and the communities where they live and work,” said a representative for KFC.
On Sunday, Florida reported more than 15,000 new cases, the highest single-day total of new coronavirus cases by state since the start of the pandemic. The state reported more than 12,000 new cases on Monday.
The pandemic has hit the restaurant industry particularly hard, many fast food chains have managed to stay afloat by relying on drive-through sales. McDonald’s delayed reopening dining rooms earlier this month as coronavirus cases surged across the country.
KFC is a subsidiary of Yum Brands, which owns other fast food chains including Pizza Hut and Taco Bell.
Hong Kong Disneyland will reclose on Wednesday to comply with a government-directed rollback of public activities in the region following an increase in coronavirus infections, the Walt Disney Company said on Monday. Disney called the closure of the theme park “temporary” and said its resort hotels at the Lantau Island complex would remain open.
In closing the Hong Kong outpost again, Disney is complying with new government restrictions on restaurants, gyms, nightclubs, mahjong parlors and other businesses.
Over the weekend, Disney executives in Florida had cited the smooth reopening of Hong Kong Disneyland and other Disney parks in Asia as evidence that Walt Disney World could reopen safely, even as coronavirus cases in Florida surge.
Hong Kong Disneyland, which is partially owned by the local government, initially closed because of the virus on Jan. 26. It reopened on June 18 with limited capacity and other safety measures, including temperature checks for visitors and employees. Hong Kong Disneyland attracted about six million visitors last year, making it the smallest park in Disney’s portfolio.
It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets of every American town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic.
But the resurgence of the virus, especially in states such as California, Florida and Texas that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent.
Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. Small businesses account for 44 percent of all U.S. economic activity, according to the Small Business Administration, and closures on such an immense scale could devastate the country’s economic growth.
On the last Friday of June, after Gov. Greg Abbott of Texas said that bars across the state would have to shut down a second time because coronavirus cases were skyrocketing, Mick Larkin decided he had enough. He and his partner decided to close their club, Krank It Karaoke in Wichita Falls, Texas, for good.
“We did everything we were supposed to do,” Mr. Larkin said. “When he shut us down again, and after I put out all that money to meet their rules, I just said, ‘I can’t keep doing this.’”
Automakers are continuing to produce cars and trucks at full speed — at least for now.
Fiat Chrysler, Ford Motor, General Motors, Honda, Toyota and other manufacturers are running almost all of their plants in the United States on two or three shifts. But as virus cases rise across much of the country, it may become difficult for the companies to keep at it.
This week, G.M. will lay off a third shift — about 1,250 workers — at its truck plant in Wentzville, Mo., where absenteeism has been rising because workers are concerned about the spread of the virus.
Last month, members of the United Automobile Workers union called on G.M. to shut down a factory in Arlington, Texas, in response to the rapid spread of the virus in that state.
Toyota said it has seen some increase in coronavirus cases among workers at its plant in San Antonio but declined to disclose how many people have been sickened.
The virus has spread rapidly in Texas in the last few weeks. The state, which allowed its stay-at-home order to lapse on April 30, has had nearly 265,000 cases, and infections have accelerated in recent weeks.
Toyota has idled its plants in Alabama, Kentucky, Mississippi and Texas as well as in Canada this week as part of a planned summer shut down.
Auto plants bring several thousand workers together under one roof each day. Manufacturers have taken a range of precautions to prevent infections among workers, including the use of masks, gloves and face shields. Companies are also monitoring the body temperatures of workers, making time for sanitizing work areas and adding barriers to shield workers who need to work close to each other to complete certain tasks.
White House economists stirred an outcry two months ago when they posted a chart to Twitter that appeared to forecast that American deaths from the coronavirus pandemic would stop by the middle of May. The chart was derided by Democrats and many economists.
Recreating that chart today yields a very different result: a skyrocketing acceleration in daily deaths from the virus.
The economists behind the chart, including both the then-interim chairman of the White House Council of Economic Advisers and a former chairman of the council, said in May that it was never meant to be read as a prediction. It was, the economic council said on Twitter, “a curve-fitting exercise to summarize COVID-19’s observed trajectory.”
The economists made their graph by plotting several forecasts of the path of the virus published over time by researchers at the Institute for Health Metrics and Evaluation at the University of Washington, then adding in a curve that was generated by running actual deaths from the virus over time through a simple function in Microsoft Excel: a “cubic fit.”
Today, it is clear that the trajectory of the virus has taken a turn that the White House models did not reflect. Infections have shot up across the South and Southwest, setting single-day records in states like Arizona, Florida and Texas. Deaths have begun to rebound as well.
A new version of the May chart, generated with the same approach the White House used but updated to reflect the actual path of virus deaths in the past two months, now differs sharply from the optimistic picture the administration once posted to Twitter. Instead of deaths falling to zero, the “cubic” curve shows that the trend has never fallen below 500 a day. Most importantly, they are now rising. And because of how cubic models work, the chart shows deaths climbing higher and higher with each passing day, exceeding 3,000 per day by the beginning of August.
That’s not likely to happen — just like it was highly unlikely in May that the trend in deaths meant they would disappear by Memorial Day.
The International Monetary Fund said on Monday that it was sharply cutting its forecast for economic growth for the Middle East and Central Asia, as Saudi Arabia and other oil exporters in the area are hit by a “double whammy” of oil price and output cuts and the effects of lockdowns.
Oil export revenue in the region is expected to decline by $270 billion, the I.M.F. said. Activities including tourism, transportation and retail are also being hit hard by the lockdowns designed to curb the pandemic, it said.
The fund said it now anticipated that oil exporters like Saudi Arabia, Kuwait, and the United Arab Emirates would experience a 7.3 percent economic contraction on average this year, down from a 4.2 percent contraction predicted in April.
Overall, across the vast region stretching from Mauritania and Algeria in North Africa to Turkmenistan and Uzbekistan in Central Asia, the fund predicted the economy would shrink by 4.7 percent in 2020, a 2 percentage point reduction from its April forecast.
The fund also warned that downward pressure on these economies would bring risks of “social unrest and political instability” and that there could be “potential renewed volatility” in oil markets, which had seen a partial recovery to about $42 for Brent crude, the international benchmark, after some crude futures contracts fell into negative territory in April.
Despite the sluggish economic performance, the fund noted that both higher credit-rated countries, including Saudi Arabia and Qatar, and others with lower ratings, including Bahrain and Egypt, have so far managed to retain access to international capital.
Monday proved to be another turbulent day for Wall Street, with stocks reversing an early gain that had briefly lifted the S&P 500 back into positive territory for the year.
The index was nearly 1 percent lower by the end of the day, after earlier having climbed more than 1.5 percent. The unsteady trading came as the number of coronavirus cases continued to rise, and investors also had the coming earnings season to consider.
Many companies, rocked by uncertainties caused by the spread of the coronavirus, have stopped giving guidance on profit projections through the year, so traders will be looking especially closely at the quarterly numbers as they are reported.
On Monday, Pepsico reported better than expected results, in part because of a jump in sales of snack foods. On Tuesday, JPMorgan, Citigroup and Wells Fargo will all report their results, and a range of other companies from Netflix to Delta Air Lines will also provide updates this week.
Stocks have climbed recently despite the unrelenting spread of the coronavirus in many parts of the world, but the market has also proven itself susceptible to a sudden downdraft if sentiment shifts and investors choose to focus on the risks to the economy or profits — something that could happen if corporate results come in far weaker than expected.
Adding to the market’s jitters on Monday was the news that Gov. Gavin Newsom of California announced one of the most sweeping rollbacks of any state’s reopening plans, saying that he would move to close indoor operations statewide for restaurants, wineries, movie theaters, zoos and card rooms, and that bars would be force to close all operations.
Florida on Sunday reported more than 15,000 new cases, the highest single-day total by any state since the start of the pandemic.
The economic crisis is prompting a growing coalition in the United States — including Democrats and Republicans, labor and business — to push for a new training effort to upgrade the skills of American workers, creating what one proponent called “a Marshall Plan for ourselves.”
Now that Independence Day is behind us, tax day is fast approaching.
Because of the coronavirus pandemic, the Treasury Department postponed the traditional April 15 federal tax filing deadline until July 15. And this time, there’s no wiggle room. Last month, the Internal Revenue Service announced that there would not be another blanket filing delay.
So if you haven’t filed your return yet — or if you’ve filed but haven’t yet paid the taxes you owe for 2019 — the deadline is Wednesday.
“It’s just like April 15, but in July,” said Cindy Hockenberry, director of tax research and government relations for the National Association of Tax Professionals, a trade group.
About 142 million taxpayers had filed returns as of July 3, according to I.R.S. statistics, but the agency has struggled to process returns because of reduced staffing during the pandemic. The agency had processed about 131 million returns as of July 3 — 10 percent fewer than the same time last year.
And some taxpayers are facing long delays in getting the refunds they’re owed, according to a report from Erin Collins, the new national taxpayer advocate, who represents filers.
The owner of New York & Co., the women’s apparel chain that traces its roots to 1918, filed for Chapter 11 bankruptcy on Monday in U.S. Bankruptcy Court for the District of New Jersey. RTW Retailwinds, which also owns the brands Fashion to Figure and Happy x Nature, said in a statement that it had about 378 retail and outlet locations and “expects to close a significant portion, if not all, of its brick-and-mortar stores.” The company blamed its bankruptcy on “the combined effects” of a difficult retail environment and the coronavirus pandemic.
Consumers continued to snack on Tostitos and Cheetos during the pandemic, boosting revenues for snacks at the food giant PepsiCo during the second quarter. Total revenues fell 3.1 percent in the second quarter to $15.9 billion due largely to a steep drop in sales in Latin America and a falloff of revenues in beverages in North America. But those declines were somewhat offset by strong sales in chips and snacks as well as a double-digit climb in the company’s Quaker Oats cereals and other foods. The company also said it hopes to grow that business this fall with the release of Cheetos Mac ‘n Cheese.
REI, the outdoor equipment chain, will lay off 400 retail employees by Wednesday as the industry continues to struggle through the pandemic, the company said Friday. The company’s cuts follow the elimination of 25 percent, or 300 employees, at its headquarters in Kent, Wash., in April.
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