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Showing posts with label deficits. Show all posts
Showing posts with label deficits. Show all posts

Friday, 3 October 2025

US GOVERNMENT SHUTDOW

 

https://bbc.com/news/articles/crrj1znp0pyo

Anthony ZurcherNorth America correspondent and
James FitzGerald  
Watch: What could happen during the US government shutdown?

The US federal government has shut down after Republican and Democratic politicians failed to resolve a budget dispute.

It means that some, but not all, US government services are temporarily suspended, and 40% of the federal workforce – about 750,000 people – are expected to be put on unpaid leave.

Although budget confrontations are common in US politics, this spending fight is especially tense because President Donald Trump has drastically reduced the size of the national government since taking office, and has suggested he may use the current impasse to make further cuts.

Why has the US government shut down?

The shutdown happened because Republicans and Democrats could not agree to pass a bill funding government services into October and beyond.

Under the US system, the different branches of government have to reach an agreement on spending plans before they can become law.

The Republicans currently control both chambers of Congress. But in the Senate - or upper chamber - they are short of the 60 votes needed to pass the spending bill, which gives opposition Democrats some negotiating power.

They want to see an extension of expiring tax credits which make health insurance cheaper for millions of Americans, and for a reversal of Trump's cuts to Medicaid, a government healthcare programme used by millions of elderly, disabled and low-income people.

Democrats also oppose spending cuts to government health agencies.

A stopgap bill designed to avoid the shutdown was passed in the House, or lower chamber, but did not clear the Senate.

And so, at 00:01 EDT on Wednesday 1 October (04:01 GMT), it became official: the US had its first shutdown for nearly seven years.

Which government services will stop, and which will carry on?

Not all aspects of government will shut down - services deemed essential will continue as normal, although in many cases staff will not be paid for the duration of the shutdown.

Border protection and law enforcement staff, Immigration and Customs Enforcement (ICE) agents, in-hospital medical care and air-traffic control workers are expected to operate as usual.

Social security and Medicare cheques will still be sent out, although benefit verification and card issuance work may stop.

Government employees deemed non-essential will be temporarily put on unpaid leave. Contractors who work for federal agencies but are not directly employed by the government will miss out on work, too.

Services like the food assistance programme and federally-funded pre-school and institutions like the Smithsonian museums will likely be reduced or closed.

Several agencies, like the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health (NIH) are also expected to furlough many workers, affecting ongoing research projects.

National parks and forests remained open during the last shutdown in 2018, but with few or no staff, which experts said led to a rise in vandalism, littering and looting of historical sites.

There could also be travel delays. The Airlines for America trade body warned that flight systems might "need to slow down, reducing efficiency". Passport agencies have also warned that it could take longer than usual to process travel documents.

Mail will still be delivered and post offices will remain open because the US Postal Service does not depend on Congress for funding.

Most American schools are state-funded, but the federal government is responsible for billions of dollars in grants and student loans, which could effectively come to a halt.

However, because the grants are typically awarded during the summer, they will be largely unaffected during this shutdown, according to the education secretary.

Members of Congress will also still be paid, a convention that has been criticised by some politicians.

How has the White House responded to the shutdown?

In the past, lengthy government shutdowns were usually seen as politically dangerous, hampering voters' everyday lives and the reputation of lawmakers and the president.

After previous shutdowns were resolved, government operations mostly returned to normal, with staff and spending levels largely going back to what they had been before.

However this time, the White House appears more than happy to shutter large parts of the US government for an extended period.

Over the past nine months the Trump administration has slashed government spending and sacked many federal workers, testing the boundaries of presidential power.

Officials have threatened to use the shutdown to identify more "non-essential" workers who could be permanently let go.

"We'll be laying off a lot of people," Trump said on Tuesday 30 September, the day before the shutdown began.

While both Democrats and Republicans are blaming each other for the current standoff, they did make last-ditch efforts to try to avoid it.

On Monday 29 September, Trump met all four congressional leaders - the top Democrats in the House and Senate as well as their Republican counterparts, but little progress was made, and both sides appeared to dig deeper into their positions.

How long will the current shutdown last?

It is difficult to say. In this case, it really depends when - or if - either of the parties will agree to a compromise.

The Republicans could negotiate an extension to the healthcare subsidies demanded by the Democrats.

Alternatively the shutdown could become so disruptive that the Democrats decide to back down and agree to fund the government - at least temporarily - to get things up and running again.

So far, the Trump administration has been been unwilling to offer substantive concessions. It believes the Democrats will bear the brunt of the public's blame because it argues the party's demands caused the shutdown.

Meanwhile the Democrats believe their efforts to secure cheaper healthcare are popular.

The party's congressional leaders provoked the ire of some left-wing activists for backing down during the last budget dispute in March.

Many Democrats seem to be itching for a bigger fight this time around – and funding the government is one of the only places where the party has some leverage.

How could the shutdown affect the economy?

The scale of the damage will depend in part on how long the shutdown lasts - and how wide ranging it is.

Analysts estimate it could shave roughly 0.1 to 0.2 percentage points off economic growth for each week that it continues - although much of that could be recouped, as has happened after previous shutdowns.

That relatively muted impact may be why the stock market seems to be shrugging off this latest threat.

But if Trump ends up firing workers, rather than temporarily putting them on furlough, the impact could be more substantial.

The US economy has already been hit by the effects of Trump's tariffs, with the likely delay of key data - such as the official US monthly jobs report - expected to add to the uncertainty.

What happened during the last US government shutdown?

Shutdowns over budgets are a unique aspect of US politics.

They have become quite common over the past 50 years - with three taking place during Trump's first presidential term.

The last shutdown in late 2018 lasted 35 days - the longest in history.

It was brought about by disagreements over funding a wall on the Mexico border. It finally ended in part because air traffic controllers, who had been working for a month without pay, started calling in sick en masse.

Flights were cancelled or delayed because of the lack of staff, and the shutdown came to an end shortly afterwards.

The Congressional Budget Office (CBO) estimated that the 2018-2019 shutdown reduced economic output by about $11bn, including $3bn that it never regained.

But shutdowns pre-date Trump.

The second longest to date was 21 days, under Democrat President Bill Clinton in 1995. His fellow Democrat Barack Obama had a 16-day shutdown during his time in the White House, and Republican Ronald Reagan oversaw eight shutdowns during his presidency in the 1980s - though all were relatively brief.


Monday, 13 August 2018

Implications of the 'RM19bil GST collected, RM18bil taken’ and RM19.4bil shortfall !

https://youtu.be/Ew5Fk-ml6Mo 

The immediate concern is the budget deficit for 2018 spiking to 4% if the GST refunds are made this year


ON May 31, when Finance Minister Lim Guan Eng announced that the new government would be able to meet the budget deficit of 2.8% for this year, the sum of RM19.4bil that is to be refunded to companies since the goods and services tax (GST) was discontinued, never came into the equation.

Now, since that money is not in a trust account that was specifically set up to meet the refund obligations, does the government need to borrow more to ensure it meets the refunds? In doing so, would it incur a bigger budget deficit than had been envisaged?

There are wider implications on the shortfall of the RM19.4bil, assuming the refunds are to be done this year.

The biggest challenge for Lim is to cover the shortfall to maintain the budget deficit for 2018 at 2.8%.

The hallmark of the Pakatan Harapan government’s first 100 days of rule is to bring down the cost of living and cost of doing business. Towards this end, it has subsidised the price of petrol and diesel and removed the GST.

The cost of keeping up with the Bantuan Sara Hidup and subsidy for petrol and diesel is estimated to be about RM6.2bil between June and December.

Revenue loss due to discontinuing the GST from June 1 onwards is estimated at RM21bil.

The shortfall is made up of cutting down government expenditure by RM10bil, increasing dividends from government agencies such as Khazanah Nasional Bhd and Petroliam Nasional Bhd, a higher petroleum income tax of RM5.4bil and proceeds from the implementation of the sales and service tax from September onwards.

Nowhere was the RM19.4bil figure that is to be paid back to companies under the GST that was discontinued mentioned.

Lim has said that the money was supposed to be in the trust account, but is not there and has gone “missing”.

Former Finance Ministry secretary-general Tan Sri Mohd Irwan Siregar Abdullah has said that all proceeds from the GST went into the consolidated fund of the federal government. The amount to be refunded is allocated to the trust account monthly based on the requirements of the Customs Department and the financial position of the government.

Customs director-general Datuk Seri Subromaniam Tholasy has revealed that since the GST was implemented on April 1, 2015, the total refunds amounted to RM82.9bil and the amount allocated to the trust account from the federal government consolidated fund was only RM63.5bil – representing a shortfall of RM19.4bil.

Generally, refunds for the GST are to be done within 14 days. But the amount allocated is less because not all refunds are paid within the two-week period.

At times, refunds are held back up to one year, pending investigations. Hence, the cash allocated to the trust account maintained by the Customs and the Inland Revenue Board (IRB) is less than the total amount due for refunds.

For instance, in 2017, the amount allocated to the IRB trust account for refunds was RM7bil when the total amount to be refunded was more than that.

In the case of the Customs, the outstanding refunds for 2017 was RM15bil, but the amount allocated was less.

Under the previous government, the GST provided a steady flow of cash every month. The thinking was that the money for refunds should be allocated when it comes due to best manage the cash-flow position of the government.

However, the view of Lim is that money meant for refunds should have been put into the trust account, irrespective of whether there is a need to pay immediately or otherwise.

Hence, the issue is not really the question of the RM19.4bil meant for refunds going “missing”.

It is whether the money is still in the consolidated accounts or whether it has been utilised. If it was utilised, did the government have the right to use it for other purposes in the name of cash-flow management?

The bigger implication for the Pakatan government is how it is going to cover this RM19.4bil shortfall.

One of the ways the government can cover the RM19.4bil hole without increasing the deficit is to cut more of the excesses.

On this score, the Pakatan government has so far handled public funds in a more judicious manner compared to the previous government. It has cut down the budget for inflated infrastructure projects and stopped unnecessary spending.

The light rail transit 3 and East Coast Rail Link projects are only some examples. It has stopped prestigious projects such as the KL-Singapore high-speed rail and the less glamorous mass rapid transit line 3 project. The government of today has earned full marks for being transparent and diligent in handling public finances.

Despite declaring that the federal government debt is at RM1.07 trillion, business sentiment is at a seven-year high, while consumer sentiment is at a 21-year high.

The stock market is looking good so far, much better than the likes of China and Hong Kong, although the improved sentiments are likely to be temporary.

As for the ringgit against the US dollar, its performance is better against many of the Asian and emerging-market currencies. The tumbling of the Turksih lira and Russian rouble is testimony that the ringgit is not that bad after all.

The government can probe, produce a White Paper or do anything else to look into the RM19.4bil shortfall, but the bottom line is that Lim and Prime Minister Tun Dr Mahathir Mohamad will have to face the reality of making up for a RM19.4bil shortfall in government finances for this year.

Economists are predicting that the federal government budget deficit would be higher than the 2.8% estimated on May 31 this year on the assumptions are made this year. Some are looking at the budget deficit to be as high as 4%

Would there be an impact on Malaysia’s credit rating and the ringgit?

Yes, a spike in the budget deficit would have an impact for the short term.

However, the government of the day will score brownie points in its drive to bring about reforms and governance in the management of public funds. Rating agencies would appreciate any government that promotes transparency and improves on its finances purely by spending within its means.

So far, the government has done away with the GST and taken measures to put more cash into the hands of the people and business to improve domestic spending. The stabilisation of petrol prices and threemonth (June to September) tax-free period between the implementation of the GST and SST has put RM20bil into the hands of the people and businesses. This should help improve the domestic economy for a few months.

However, for the longer term, investors and rating agencies will be looking at how the RM19.4bil hole in the federal government finances will be covered. What are the government assets that will be sold?

Certainly, we are not looking at an expansionary budget come November this year.

Source:  The Alternative view by M.Sshanmugam The Star

RM19bil GST collected, RM18bil taken’




KUALA LUMPUR: The previous government has not been able to refund companies their tax credit that came about following the implementation of the Goods and Services Tax (GST) because 93% of the money was not placed in the correct account, Finance Minister Lim Guan Eng revealed.

He said some RM18bil of the RM19.4bil input tax credit under the GST system since 2015 was “robbed” by the previous administration.

“I was very shocked when informed that this happened because the previous government had failed to enter the GST collection in the trust account specifically meant for the repaying of GST claims.

“Instead, the Barisan Nasional government pilfered the trust account and entered cash GST collection directly into the consolidated fund as revenue to be spent freely,” he said when tabling the GST (Repeal) Bill 2018 during its second reading in Parliament yesterday.

He said that as of May 31, the outstanding GST refund stood at RM19.397bil whereas there was only a balance of RM1.486bil in the repayment fund.

Lim said from the total input tax credit, RM9.2bil or 47% was recorded between Jan 1 and May 31 this year, RM6.8bil or 35% in 2017, RM2.8bil (15%) in 2016, and RM600mil (3%) in 2015 (from April 1 to Dec 31, 2015).

Under GST, the input tax credit allowed businesses to reclaim credit for taxes paid on purchases, subject to filing of input tax documents.

In his winding-up reply, Lim said a comprehensive investigation would be carried out to determine the cause of the missing funds.

When debating the Bill, Lim also said he had asked for documents to show how the input tax had ended up in the consolidated fund.

“I asked the Chief Secretary to the Government for the Cabinet papers on the matter.

“However, he told me he could not remember anything of such,” he added.

Lim said former Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz, when told of the missing funds, said it was imperative that the money was returned to the claimants as it was fiscally moral to do so.

Later, at the Parliament lobby, Lim said a former Treasury secretary-general may have been aware of the missing RM18bil.

The previous government, he said, had committed wrongdoing over the missing funds.

“I would assume the previous KSP (ketua setiausaha perbendaharaan/Treasury secretary-general) would have known about this.

“We want something definite because we want to look at the circle of decision-makers,” he said.

By martin carvalho, hemananthani sivanandam, rahimy rahim, and loshana k shagar The Star

Khairy urges gov't to bring 'GST robbers' to book




BN MPs want Najib, RM18b GST 'robbery' claim investigated





Related 

GST refunds should be in trust account: ACCCIM - theSundaily

 

RM18b input tax credit under GST system robbed ... - The Straits Times

 

Related posts:

 

What concerns Malaysians most ? 

 

Jobs ahead for Pakatan's first 100 days fiscal reform

 

Singapore budget 2018: hiking its sales tax, but not until 2021 or later

 

Wednesday, 21 November 2012

US Fiscal Cliff poses threat to economy worldwide!

Falling off the fiscal cliff would have a global economic impact, analysts say

The so-called "fiscal cliff" has been on the horizon for two years, but now the 31 December deadline is almost here.

Now that the presidential election is over it is hoped that policymakers will knuckle down to find a solution.



US fiscal cliff may hamper Malaysian economy, says economist

KUALA LUMPUR: Malaysia could experience a slower economic growth of between 3% and 4% next year if the US fiscal cliff kicks in by next January, OCBC Bank Bhd's economist Gundy Cahyadi (pic) said.

“It's going to create a huge impact if this were to happen. The fiscal cliff will create a recession in the US where its economy will likely contract by 0.5% and this may lead to a bigger than expected recession in the eurozone. The spill over effects may lead to global trade falling quite significantly.

“On the whole, we expect a growth of between 3% and 4% for next year,'' he said at a press briefing on OCBC's regional and global economic outlook for 2013. Fiscal cliff involves the simultaneous move to increase tax and spending cuts to reduce budget deficit.

He said on the whole OCBC was projecting the country's gross domestic product (GDP) for next year to be at 5.2% year-on-year, adding that at this juncture, the risk posed by the fiscal cliff was expected to be limited as the US government might finalise a new deal.

Gundy said the economic growth would be supported by Malaysia's investment growth, which was more than 20% for the first three quarters of this year, and strong positive momentum in private consumption growth.

However, he added the 20% investment growth would not recur next year but it would still expand by close to double digit, at least in the first half of 2013 as the Government was expected to continue ramping up infrastructure overhaul currently in progress.

The main risk to the bank's projection he said was the possible slump of global demand, especially as exports remained a main drag to Malaysia's growth in 2012.

External demand had continued to be a large drag on the country's economy, he said, noting that in terms of nominal value and its contribution to GDP growth, net exports were at a record low in the third quarter of this year.

Exports growth had been sluggish throughout the year, he said partly on the back of commodity price correction, and falling exports earnings would not only affect growth directly but would have negative spillover effects to households' spending behaviour.

There may be further pressure from the recent slump in crude palm oil prices which could be quite detrimental given the commodity boom seen in the past several years had led to a spike in investment in palm oil related industries, Gundy added.

On inflation, he said OCBC expected it to trend higher next year to about 3% from the likelihood of below 2% this year.

BY DALJIT DHESI The Star/Asia News Network

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