Economy

The U.S. budget deficit was sliced in half for fiscal 2022, the biggest drop in history following two years of huge Covid-related spending.
The shortfall declined to $1.375 trillion, compared to the 2021 deficit of $2.776 trillion. Revenue posted easily the highest one-year total on record.
The deficit decline would have been steeper had it not been for the Biden administration’s student loan forgiveness program.

The U.S. budget deficit was sliced in half for fiscal 2022, the biggest drop in history following two years of huge Covid-related spending.
Though still large in historical terms, the budget shortfall declined to $1.375 trillion, compared to the 2021 deficit of $2.776 trillion.

The decline would have been steeper had it not been for the Biden administration’s student loan forgiveness program. Education spending totaled $639.4 billion for the fiscal year, $408 billion higher than estimated.
The 2022 fiscal year saw $4.896 trillion in revenue against $6.272 trillion in outlays. The outlays number represented about a $550 billion decline in spending but an $850 billion increase in revenue. The revenue total is by far the highest ever for the U.S. government.
Deficits in the previous two years soared as Congress shelled out massive sums to combat the pandemic.

U.S. Treasury Secretary Janet Yellen listens to a reporter’s question at a news conference during the Annual Meetings of the International Monetary Fund and World Bank in Washington, U.S., October 14, 2022. 
Elizabeth Frantz | Reuters

The shortfall hit a record $3.13 trillion in 2020 due to more than $5 trillion in CARES Act spending and other outlays. In 2019, the deficit was $983.6 billion. Prior to 2020, the highest deficit ever was $1.41 trillion in 2009 as the financial crisis came to a close. The U.S. briefly ran a surplus from 1998 to 2001.
In fiscal 2021, legislators passed the American Rescue Plan, a $1.9 trillion spending package that the White House said helped get the nation through a severe health and economic crisis, but which critics say was unnecessary and helped fuel the highest inflation rate in more than 40 years.

President Joe Biden, however, placed the deficit blame on Republicans for approving the 2017 tax cut bill.
“The federal deficit went up every single year in the Trump administration — every single year he was president,” he said. “It went up before the pandemic. It went up during the pandemic. It went up every single year on his watch, Republican’s watch.”
Biden called the GOP fiscal approach “mega-MAGA trickle down” that he defined as “the kind of policies that have failed the country before and it’ll fail it again.”
Treasury Secretary Janet Yellen said the budget statement released Friday “provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan.”
Yellen added that the results also showed Biden’s “commitment to strengthening our nation’s fiscal health.”
Earlier this year, the White House pushed through the Inflation Reduction Act aimed at a variety of areas including reducing medical costs, boosting clean energy and reforming the tax code. However, inflation has continued to climb, and administration officials have stressed that the Federal Reserve’s primary role in fighting price increases is through interest rate hikes.
—CNBC’s Emma Kinery contributed reporting.

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CHICAGO (Reuters) – The U.S. government is holding talks with health insurers and drugmakers as it sets up the framework for direct negotiations of prescription drug prices for Medicare recipients, a top Biden administration official said on Friday.President Joe Biden in August signed into law the Inflation Reduction Act, which among its provisions for the first time allows the federal Medicare health plan for people age 65 and older and the disabled to negotiate prices on some of the most expensive drugs.”We’re already beginning those conversations,” U.S. Centers for Medicare and Medicaid Services (CMS) Administrator Chiquita Brooks-LaSure said at a Reuters Events health conference in Chicago.”We’re in the process of figuring out what questions people need answered from us, whether it’s health plans who are trying to figure out how are they going to incorporate what we’re doing into the benefits for people, thinking about the companies and how are they going to submit the data,” she said.CMS needs to collect data so it can identify the first 10 drugs that will be subject to negotiations, a list that will expand to 20 by 2029. It has started hiring for a new negotiation team this fall, Brooks-LaSure said, and will continue to do so over the coming months.Government negotiation of drug prices represents a rare legislative defeat for the powerful pharmaceutical industry and sets a precedent for curbing rising prescription drug prices in the world’s most lucrative market for medicine. Still, Brooks-LaSure said the talks were so far collaborative.”The feeling that I get from the stakeholders that we are meeting with right now is a feeling of we may not agree on what the law asks us to do, but there is a desire for it to work well,” she said.Health officials are also talking to insurers and drugmakers about moving sales and distribution of COVID vaccines and treatments to the private sector, she added. The government expects its supplies to run out over the next year and is preparing for them to be sold via the commercial market.”That is a conversation that we are engaged with, and meeting with payers, meeting with companies, and really trying to answer the questions that will come when we get out of the public health emergency.”Some experts have said they expect the official COVID-19 public health emergency designation will expire in January.”I don’t know when the public health emergency will end, exactly,” Brooks-LaSure said. “But we know that we are in a different place than we were a couple of years ago.” More

NEW YORK (Reuters) -The banks providing $13 billion in financing for Tesla (NASDAQ:TSLA) CEO Elon Musk’s acquisition of Twitter Inc (NYSE:TWTR) have abandoned plans to sell the debt to investors because of uncertainty around the social media company’s fortunes and losses, people familiar with the matter said.The banks are not planning to syndicate the debt as is typical with such acquisitions, and are instead planning to keep it on their balance sheets until there is more investor appetite, the sources said. The banks, which include Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), and Barclays (LON:BARC) Plc, declined to comment. Representatives for Musk and Twitter did not immediately respond to requests for comment. Musk agreed to pay $44 billion for Twitter in April, before the Federal Reserve started raising interest rates in a bid to fight inflation. This made the acquisition financing look too cheap in the eyes of credit investors, so the banks would have to take a financial hit totaling hundreds of millions of dollars to get it off their books. Also preventing the banks from marketing the debt was uncertainty around the deal’s completion. Musk has tried to get out of the deal, arguing Twitter misled him over the number of spam accounts on the platform, and only agreed to comply with a Delaware court judge’s Oct. 28 deadline to close the transaction earlier this month. He has not revealed details on Twitter’s new leadership and business plan, and many debt investors are holding back until they get more details on that front, the sources said. The debt package for the Twitter deal is comprised of junk-rated loans, which are risky because of the amount of debt the company is taking on, as well as secured and unsecured bonds.Rising interest rates and broader market volatility has pushed investors to stay away from some junk-rated debt. For example, Wall Street banks led by Bank of America suffered a $700 million loss in September on the sale of about $4.55 billion in debt backing the leveraged buyout of business software company Citrix Systems Inc (NASDAQ:CTXS).In September, a group of banks canceled efforts to sell about $4 billion of debt that financed Apollo Global Management (NYSE:APO) Inc’s deal to buy telecom and broadband assets from Lumen Technologies after failing to find buyers. More

Moody’s maintained its sovereign rating for the United Kingdom at “Aa3”.British Prime Minister Liz Truss resigned on Thursday triggering a leadership contest that, coming so soon after the bitter one that put her into power, could deepen divisions in the governing Conservative party.There was “heightened unpredictability in policymaking amid weaker growth prospects and high inflation,” Moody’s said. The report said there was also “risks to the UK’s debt affordability from likely higher borrowing and risk of a sustained weakening in policy credibility”.Former finance minister Kwasi Kwarteng announced around 45 billion pounds of permanent, unfunded tax cuts on Sept. 23 alongside an expensive plan to cap energy tariffs for household and businesses.The move sent sterling and bond markets into a tailspin and triggered a political crisis that led to Truss firing Kwarteng, reversing almost all the planned tax cuts and then announcing her own resignation.New finance minister Jeremy Hunt says he will do “whatever it takes” to restore confidence in Britain’s public finances. He is due to announce a plan on Oct. 31 aimed at bringing down public debt as a share of economic output in the medium term. More

For British households absorbing one of the biggest squeezes on incomes since the second world war, the pain of the current cost of living crisis comes in many guises.“It definitely means less people are getting tattoos,” said self-employed body artist Lewis Corps with a roll of his eyes as he sat waiting for customers at the Nine Lives tattoo parlour in the town of Hove on England’s south coast.For Cassandra Metcalfe, a 38-year-old restaurant manager in Hove whose electricity bill jumped from £25 to £110 a month, it has meant changing her personal living arrangements. “I’ve had to get someone to share my flat,” she said, after her landlord put up her rent.Such adjustments to life are small compared with the privations of those at the bottom end of the income spectrum, but as the political soap opera continues in Westminster following the downfall of Liz Truss after just six weeks in office, they are starting to bite.Peter Kyle, the Labour MP for Hove, is seeing the change at his weekly surgeries for constituents © Charlie Bibby/FTPeter Kyle, the Labour MP for Hove, whose constituency includes well-to-do middle class neighbourhoods as well as a ward that is among the poorest 10 per cent in England, is seeing the change at his weekly surgeries for constituents.Inquiries about energy bills have risen by nearly a half, and debt-management issues up by a third over the past three months. “Before people were juggling bills, now many are in a place where they are working out which one they don’t pay first,” he said.In the cafés, hair salons and nail bars along Hove’s George Street pedestrianised shopping area, commentary about turmoil in Westminster this past week is expletive laden.“It’s a complete and utter shitshow, let’s be honest,” said Elliot Waring, 28, sitting outside having coffee with his sister Lilie, whose electricity bill increased in October from £31 to £111 a month, “And now they’re talking about bringing Boris [Johnson] back when he’s only just been thrown out because he was incapable of running the country. Seriously?”

Even those who profess not to follow the news closely appear to have heard of the former prime minister’s possible return to Downing Street.“It’s disgraceful, the Tories have reached the stage where it’s just about their internal struggles, not about helping people who are really struggling to pay their bills and mortgages,” says Fiona Kent, a 62-year-old part-time teacher and Labour party member, who said she now sometimes took coffees to the park or the beach rather than meeting friends in cafés.Not everyone was aghast at the prospect of a Johnson resurrection. One 78-year-old conservative voter who was worried that the government might remove the “triple lock” protecting the value of her pension, said Boris could be a “buffoon”, but added that “as a leader, he has standing around the world”. Still, even those with reasonably well-paid jobs and mortgages still safely tucked under fixed-rate deals said they were conscious of the gathering storm clouds, particularly when the government’s energy price cap expires in April.“You can see the weight on people’s shoulders and in their faces,” said Heidi, sitting having a smoke outside Georgie’s café. “And everyone knows it’s going to get worse.”Torsten Bell of the Resolution Foundation, a think-tank that focuses on cost of living issues, concurred and noted that households that have already seen prices rising far faster than their wages had more pain to come.‘Everyone knows it’s going to get worse’ — Heidi in Hove © Charlie Bibby/FTWith average energy bills on course to reach £4,000 next April, Bell warned that it would not be just low-income households that struggle to pay their bills. As interest rates rise to tame inflation, 5mn households will face higher mortgage payments by the end of 2024.“The depth of the cost of living crisis is very much ahead of us,” he said. “Family incomes are set for falls next year on a scale we only normally see in deep recessions.” For those at the bottom end of the income distribution who are receiving social security benefits like universal credit, which may now not even increase by the rate of inflation, the pain point was passed some time ago, according to frontline community workers.Wayne Dobson, chief executive of the Cedarwood community centre in North Shields, one of the poorest areas of England’s north-east, said that over half of the people using his centre’s food bank were in work.“There’s a queue of 40 people every day. To be honest, Westminster might as well be on the moon for all anyone cares. Austerity never went away, it just changed its name to ‘cost of living’ or ‘Covid’,” he said, referring to the decade of public spending cuts imposed by Conservative-led governments after 2010.With Jeremy Hunt, the chancellor, demanding Whitehall departments find billions more in savings in order to balance the books ahead of the fiscal statement planned for October 31, those helping the poorest say they are genuinely scared about the winter.Lisa Cover, development manager at Northwood Together, a community project serving one of the lowest-income suburbs of Kirkby, a satellite town of Liverpool, said the group had even given up charging 20p for a cup of tea at their drop-in centre because it was deterring people from coming in to get warm.Recalling a visit this week to a family with eight children who had no electricity and no nappies, Cover said that even simple changes, such as the government’s insistence on paying universal credit payments monthly rather than fortnightly, were tipping families over the edge.“I really, really do fear for people this winter,” she said. “There is all this madness going on, with Liz Truss and her madcap ideas, then she walks away after a few weeks in power because she found it too hard. It’s a disgrace. An utter farce. And that’s the way people see it.” More

More than half a trillion euros have been pledged since September 2021 by countries across Europe to shield households and businesses from exorbitant energy costs. As the pandemic and then Vladimir Putin’s invasion of Ukraine led to a surge in natural gas prices, governments have briskly rolled out measures including grants, price caps and commuter allowances. The longer the crisis goes on, the more those interventions will need to be fine-tuned to limit expenses and curb energy demand. Britain this week decided to slash and review its two-year energy-price guarantee, while Germany is assessing how to allocate a new €200bn package.Energy prices will remain high beyond this winter. Estimates suggest annual UK household bills could rise to more than £4,000 in April — from the guarantee of £2,500 on average — when support ends in its current form. While European natural gas prices have fallen recently, they are still forecast to be well above prewar levels for some time. Gas stores will be harder to fill next year with little supply from Russia, and global competition for liquefied natural gas will be fierce.National policies will need to evolve and strike a difficult balance. This includes targeting those who need support the most, while keeping spending down; at a time when government debt burdens are rising and inflation is near 40-year highs. Above all, while policies need to protect households and businesses, they will need to ensure that price incentives to reduce energy consumption are also adequately upheld, otherwise demand will continue to press against constrained supplies. Countries have so far taken a range of approaches. In June, Spain and Portugal implemented a cap on the wholesale price of gas, essentially providing a payment to electricity producers to finance part of their fuel cost (EU leaders on Friday endorsed plans for a bloc-wide cap). France has limited increases in the retail price of gas and electricity. Meanwhile, Germany recently outlined a plan to offer lump-sum payments to gas consumers based on a proportion of their historical use. Each has its pros and cons. Price caps are easily understood, but they reduce incentives to conserve energy. A recent study on Spain’s cap showed it initially led to a more than 40 per cent increase in gas-fired generation. They are also expensive and poorly targeted, helping those who do not need it as much. The IMF advocates letting retail prices rise while protecting the most vulnerable through income relief. This is an ideal approach: it can be easier on the public purse and encourage less energy use. Yet mechanisms to calibrate and disburse cash payments in proportion to need are not always in place. Providing payments based on need across the income scale could be challenging and expensive, particularly if energy prices remain high. Since energy use tends to increase with income, one approach could be to set tiered tariffs on bills, where the price per unit of energy used increases with usage. Above a certain amount, users would face the market price. Grants could then be provided to the most vulnerable households that have above average energy demands, which can be identified through benefit systems. This would be cheaper than a universal price cap, and retain incentives to conserve energy.While energy supplies this winter may now seem less precarious, next winter is a concern. Securing new supplies and raising efficiency will remain crucial. As for cushioning the blow to the cost of living, there are difficult trade-offs for policymakers. But what began as emergency measures to ease the pain will need to adapt if countries are to meet the broader financial and energy rationing demands of the crisis. More

Today’s top storiesEU leaders hailed a fall in gas prices just hours after agreeing plans for a price cap. German chancellor Olaf Scholz reluctantly backed the proposal after initially arguing that it would risk diverting supplies to other countries that offer a higher price. Spain and France agreed to build an undersea pipeline between the two countries, dropping the idea of a link over the Pyrenees.Giorgia Meloni told Italy’s president that her rightwing coalition was ready to form a government with her as prime minister, after days of rancour inside the alliance over cabinet posts.Barclays is challenging a £50mn fine from UK regulators over the bank’s allegedly “reckless” failure to “disclose certain arrangements” about controversial Qatari fundraising 14 years ago, during the height of the financial crisis.For up-to-the-minute news updates, visit our live blogGood evening,Disrupted Times was created to chart the unsettling period that people are now living in across the world as a result of a pandemic, an energy crisis and a brutal war in Europe. What we did not expect was the extent that disruption would become the new norm for UK political life.The finale of the latest season of this Westminster “psychodrama” came yesterday with the resignation of Liz Truss, now infamous as the country’s shortest-serving prime minister, quitting the job after 44 days of intense economic and political turmoil.You can better understand the reasons for her downfall and the contenders for the job — including wannabe comeback kid Boris Johnson — by following our UK politics coverage. For a daily morning update on the Tory Game of Thrones, sign up here for Stephen Bush’s excellent Inside Politics newsletter.The economic challenge for Truss’s successor is daunting, with fresh data this morning again highlighting the problems piling up in the prime ministerial in-tray.Government borrowing jumped to a much higher than expected £20bn last month, thanks to higher debt interest payments. This was £2.2bn more than in the same month last year and the second-highest September reading since monthly records began in 1993.Retail sales were also worse than expected, shrinking 1.4 per cent between August and September and fuelling fears of recession — perhaps understandable when you read that UK consumer confidence is hovering around a 50-year low.The drumbeat of gloomy data adds to fears of a Halloween slashfest of public spending cuts when newly-installed chancellor Jeremy Hunt unveils his plan for filling the £40bn hole in UK public finances. (Assuming his new boss, who is likely to take over just days before, is on board with Hunt’s remedies.).Whoever takes the crown also faces the tough task of regaining the trust of the markets, writes markets editor Katie Martin. The initial muted reaction to Truss’s resignation suggests her departure — and the end of Trussonomics — had already been priced in.Business too will need some reassuring. The recent turmoil resembles a “playbook for bad business management”, writes columnist Cat Rutter Pooley, where a new chief executive comes in, unveils a strategy so disastrous it sparks an immediate investor exodus — and then sacks the finance director. And if there’s one thing that deters outside investment, it’s uncertainty, columnist Tim Harford notes.The price for these errors will be paid by the British public, many of whom will end up worse off than they were before the tax-cutting “mini” Budget. Tax, pensions and energy policy have all been tossed into the political salad spinner, says consumer editor Claer Barrett, referencing the Daily Star’s stunt of pitting a lettuce against the PM to see which would expire first.The FT editorial board brings us back to the deadly serious nature of the chaos, which has shattered the UK’s credibility, with three prime ministers in eight weeks, two of whom have come to power without a general election.“The government cannot be surprised that if the UK appears to act like an emerging market with chaotic governance, investors treat it like one,” the FT concludes.Need to know: UK and Europe economyThe EU is bracing for more refugees from Ukraine as Russian forces target the country’s power infrastructure. Ukrainian president Volodymyr Zelenskyy said 30 per cent of power stations had been destroyed.Ukrainian officials meanwhile were taken aback by suggestions that US Republicans could scale back support for Kyiv if the party wins the House of Representatives in next month’s midterm elections.Need to know: Global economyAccording to futures markets, investors now expect the Federal Reserve to raise US interest rates to 5 per cent next year as it continues to fight surging inflation.As Chinese growth slows, there are rising expectations that Xi Jinping, who is set for a third term as president, will pivot towards redistribution and a possible crackdown on the ultra rich. This week’s decision to delay third-quarter economic data continues a trend towards opacity, says chief data reporter John Burn-Murdoch.As nations retreat behind borders, a new global order offers new opportunities, argues columnist Rana Foroohar in her guide to a deglobalising world.On the other hand, those geopolitical threats can be pretty scary, including a potential Chinese invasion of Taiwan before 2024.Need to know: businessFinancial markets may have done for Liz Truss, but for the London Stock Exchange it has meant a 16 per cent year-on-year rise in third-quarter revenues to £1.9bn. Around 30 per cent of the group’s revenues come from trading and transactions, which “tends to benefit from the volatility and the uncertainty in an environment like this”, the exchange’s chief executive said.Blackstone, the world’s largest alternative asset manager, reported a dip in profits as tightening financial conditions and plunging stock market valuations dramatically slowed the sale of investments.InterContinental, the owner of the Crowne Plaza and Holiday Inn hotel chains, said US business travel revenues were now back at pre-pandemic levels, dispelling some fears that remote working would permanently cut industry demand.Another hopeful sign for the recovery in air travel came with European short-haul carrier Wizz Air’s plans to start flights from the UK to the Middle East and Asia. Some airlines have a new problem, however: not enough planes.One of the EU’s top lawyers has dealt a blow to hopes that a new era of telecoms dealmaking was on the way, backing a 2016 decision from Brussels to stop what would have been a blockbuster merger of O2 and Three.Science round-upUS health officials are investigating a controversial study from Boston University that created an artificial form of Covid-19, reigniting a debate over whether this type of research poses the risk of accidental infection that could start another pandemic.Kate Bingham, the head of the UK’s vaccine procurement team, tells the inside story of the risks, criticism and political interference she faced in her new book on the Covid pandemic response.Ladybirds, food dye and fungi are all being pressed into use as biological alternatives to toxic pesticides. Read this and more in our new special report: Sustainable Food and Agriculture.Our Big Read examines the case for carbon capture, first put into practice more than 50 years ago but which has never fully lived up to its backers’ promises. The technology has now received a significant boost from tax incentives in the new US Inflation Reduction Act. Here’s our film on the technology from earlier this year.

Video: Carbon capture: the hopes, challenges and controversies | FT Film

Get the latest worldwide picture with our vaccine trackerSome good newsDr Jessica Wade is a champion of Wikipedia biographies for under-represented communities © Dr Jessica WadeDr Jessica Wade, a research fellow at Imperial College London, has written more than 1,750 Wikipedia biographical entries for women and people of colour in science since 2018.Wade told Disrupted Times: “We really overlook women’s inventions and innovations and breakthroughs in science, and history books have done a really bad job of documenting them. And now we’re in an age where we can rectify that record, but also we can cement it for future generations.” More

LONDON — Britain’s economy has been buffeted by the effects of Brexit, the war in Ukraine and, most recently, the government’s dramatic reversal on a series of planned tax cuts that led to the resignation of Prime Minister Liz Truss. But for Scotland’s whisky producers, business is booming, and the British pound’s precipitous decline against major currencies is providing an extra boost, making whisky more affordable for buyers outside of Britain.“The currency has had a major effect — there’s no question about that,” said John Stirling, the co-founder of Arbikie Distillery in Scotland.The volume of whisky exports from Britain has grown over the past two years, including a 10.5 percent increase during the 12 months ending in July over the same period the year before, according to government data.At the Arbikie Distillery. Global demand for whisky has been growing.The surge in exports, driven by higher demand from the United States and the Asia-Pacific region, comes as 20 distilleries have opened in Scotland in the past six years, bringing the total number of distilleries there to 141.As demand for Scotch rises, the pound is trading near historically weak levels. Last month, the pound briefly sank to $1.035, a record low against the dollar in response to Ms. Truss’s economic overhaul, which included £45 billion ($50 billion) in unfunded tax cuts, spooking investors. Her government has since scrapped almost all of the planned cuts, but the pound’s decline has been part of a larger downward trend against major currencies, including those used in the United States, France, Taiwan, India, Singapore and China, the top destinations for Scotch. In the year ending in July, 18 percent of whisky exports, by value, went to the United States, according to government data.Britain is also facing systemic economic issues, such as weak productivity, low pay growth, a shortage of workers and unsteady business investment since the country voted in 2016 to leave the European Union. On Wednesday, the government reported that the country’s consumer prices had risen 10.1 percent in the year through September, driven in part by food prices that recorded their largest increase in more than 40 years.Mr. Perez-Solar with one of the casks at Arbikie Distillery. Twenty distilleries have opened in Scotland in the past six years.With high inflation expected to weigh on consumer spending and business investment, the International Monetary Fund predicted the British economy would go from 3.6 percent growth this year to a 0.3 percent contraction next year.But whisky companies like James Eadie have been able to weather the economic headwinds.“Overall if you look at the last two to three years, we’ve just been going through an incredibly buoyant time,” Rupert Patrick, the chief executive of James Eadie, said. “We’ve all been slightly scratching our heads saying, I wonder why it is so good at the moment.”Inflation F.A.Q.Card 1 of 5What is inflation? More