Coronavirus: US to borrow record $ 3 billion as spending increases

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The United States has said it wants to borrow a record $ 3 billion (£ 2.4 billion) in the second quarter as coronavirus rescue programs blow the budget.

The sum represents more than five times the previous quarterly record, established at the height of the financial crisis of 2008.

In 2019, the country borrowed $ 1.28 billion.

The United States has approved approximately $ 3 billion in relief from the virus, including health funding and direct payments. The total debt of the US government is now close to $ 25 billion.

The packages represent about 14% of the country’s economy. The government also extended the April 15 annual deadline for tax payments, adding to the cash crisis.

The new borrowing estimate is more than $ 3 billion higher than the previous government estimate, an indication of the impact of the new programs.

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Discussions are underway on additional aid, although some Republicans have expressed concerns about the impact of the increased spending on the nation’s national debt.

The United States borrows by selling government bonds. Historically, it has benefited from relatively low interest rates since its debt is considered relatively low risk by investors around the world.

But even before the coronavirus, the country’s debt level had climbed to levels that many economists consider risky for long-term growth, as the country spent more than it absorbed.

Last month, the United States Congressional Budget Office predicted that the budget deficit would reach $ 3.7 billion this year, while the national debt exceeded 100% of GDP.

Last week, President of the US Central Bank, Jerome Powell, said he wished the books of the United States government were better placed before the pandemic.

However, he said spending was now essential to cushion the economic blow, as business closure orders to slow the spread of the virus cost at least 30 million people to employ.

“The economy may well need more help from all of us to make the recovery strong,” he said.

As part of its own relief efforts, the Federal Reserve has purchased more than $ 1 billion in treasury bills in recent weeks.

Investors from foreign countries are also historic holders of US debt, with Japan, China and the United Kingdom leading the pack in February.

Increased tensions between the United States and China in recent years have renewed scrutiny of the US debt. According to the Washington Post last week, Trump administration officials discussed the cancellation of debts to China, but US President Donald Trump would have downplayed the idea, saying that “you start playing these games and it’s difficult “.

For the moment, persistent low rates suggest that investors’ appetite for US debt remains, allowing for increased borrowing, Alan Blinder, professor of economics and public affairs at the BBC, said last month. Princeton University.

“So far, the answer has been that everything is fine, as to the amount of borrowing the US government can do before investors start to feel full of American debt,” he said. “But there is a legitimate question. “

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