Economy: CBO says the deficit is decreasing
The federal budget deficit “is shrinking far faster than anyone in Washington expected,” said Annie Lowrey in The New York Times. Douglas Elmendorf, director of the Congressional Budget Office, released a new report last week estimating that the deficit for the current fiscal year, which ends on Sept. 30, “will fall to about $642 billion, or 4 percent of the nation’s annual economic output.” That’s $200 billion lower than the CBO’s estimate from three months ago. The figures have been generally greeted as heartening evidence of “how the economic recovery has begun to refill the government’s coffers.”
However encouraging, smaller budget shortfalls like this one may not last, said Damian Paletta in The Wall Street Journal. The CBO attributes them to higher tax revenues and large dividend payments from mortgage-finance companies Fannie Mae and Freddie Mac. But it said the improvement would begin to “reverse course in 2016, when spending picks up” and revenue levels off. And despite shrinking deficits, the federal debt will begin climbing again by 2019, remaining above 70 percent of GDP. “Such high and rising debt later in the coming decade would have serious negative consequences,” the CBO said.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
Banks: JPMorgan may split chief’s role
One of Jamie Dimon’s jobs is on the line, said Joann S. Lublin and Dan Fitzpatrick in The Wall Street Journal. Shareholders of JPMorgan Chase will vote next week on a resolution to split the bank’s CEO and chairman jobs, stripping Dimon of the chairman title. The bank’s executives and directors have endorsed the current management structure, though support for the split among shareholders “is running slightly ahead of the 40 percent it received last year.” Dimon has said “he might leave the bank altogether if shareholders vote to separate the positions.”
Tech: Twitter valuation hits $10 billion
An investment fund says Twitter may be worth almost $9.8 billion, said Ari Levy and Douglas MacMillan in Bloomberg.com. GSV Capital Corp., which owns 1.9 million Twitter shares, announced the valuation in a filing last week. The social media firm’s net worth has been on the rise alongside expectations of an IPO. While the company has denied concentrating on going public, “it is widely predicted to hold a share sale before long to help it bankroll expansion, and give early investors a way to realize financial gains on their holdings.”
Jobs: HSBC slashes more staff
Europe’s largest bank, HSBC, hopes to save $3 billion by slashing up to 14,000 jobs, said Howard Mustoe and Gavin Finch in Businessweek.com. CEO Stuart Gulliver “is focusing on reducing costs, selling assets, and expanding in faster-growing markets as he struggles to boost revenue that’s been crimped by the sovereign debt crisis in Europe.” Since 2011, he’s cut more than $4 billion in annual expenses and laid off 46,000 workers. “You’re getting cost cuts as a means of sustaining performance, and that’s not a great sign,” said analyst Simon Maughan.
Markets: Stocks keep soaring
Stock markets “shrugged off disappointing economic data in the U.S. and Europe last week,” said Kim Hjelmgaard in USA Today, continuing their “move higher into record territory.” Both the Dow Jones industrial average and Standard & Poor’s 500 index hit record intraday highs, despite disappointing news that “U.S. factories cut back sharply on production in April.” The Federal Reserve also said manufacturing had dipped 0.4 percent in April from March, the largest monthly drop since October. Google, meanwhile, topped $900 per share as the search firm launched a new music subscription service.
