Relief checks, Social Security payments, tax refunds, consumer credit, job market... | Summary news 9 March
US Finance: Latest Updates
Headlines: Thursday, 9 March 2023
- White House releases details of Biden's 2024 budget
- Chairman Powell says the Fed will increase rates later this month, but how high could they reach by the end of the year?
- Last week, initial unemployment claims rose by 21,000 to 211,000.
- 3.8 million workers quit their job in January, down from 4 million in December.
- How to claim the Child Tax Credit in 2023
- Biden proposesnew Medicare tax plan
- Student-loan borrowers should have a “Plan-B” for debt forgiveness
- Experts warn of an impending 20% drop in US housing
- Markets quiet ahead of crucial February jobs report
2023 Tax Season
- Who can claim the additional standard deduction?
- The way to access IRS transcripts to ensure a faster tax refund
- Did you receive a state stimulus check? No need to report the payment as income to the IRS.
Read more from AS USA:
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The Social Security Administration sent out payments to over 71 million Americans in January 2023, making it one of the most widely-used federal support programs. Due to the monumental nature of issuing so many payments, the agency spreads out when they are sent depending on date of birth, type of benefit and when a recipient first signed up for Social Security.
This month some recipients will be in line to get two payments. Here's when they will arrive...
How will the Biden budget affect taxes?
During campaigning for the 2020 presidential election, Joe Biden repeatedly claimed that he would not raise taxes for those earning less than $400,000 per year. The President appears to be sticking to that pledge after his 2024 budget was released earlier today, raising the tax rates for high earners and corporations.
Biden will hope that tweaks to the tax system can provide sufficient extra revenue to keep Medicare solvent for decades to come.
Biden to reverse Trump-era tax cuts for the richest
Details of President Biden's 2024 budget have been released today as he looks to right the US' economic position. Federal spending has been an issue of major contention in recent years and Biden's more progressive agenda has been criticised in some quarters as being too costly.
However this new budget would reduce the US' annual deficit considerably. Much of the savings come from reversing the tax cuts for the richest Americans that were passed under former President Trump. Biden wants to see the corporation tax rate return to 28%, after Trump lowered it to 21%.
The White House has released President Biden's new budget for finacial year 2024, with some significant changes for one of the most widely-used federal programs. Medicare is in danger of becoming insolvent in the coming years unless changes are made and Biden has proposed important alterations to the tax system to help with that effort.
A White House press release states: "The Budget strengthens Medicare by extending the solvency of the Medicare Trust Fund by at least 25 years, without cutting any benefits or raising costs for beneficiaries."
To be sure, a deep recession would tame inflation. But why would we invite that? Fed Chair Jerome Powell and his colleagues seem to relish cheering against the economy. Meanwhile, their friends in commercial banking are making out like bandits now that the Fed is paying 4.4% interest on more than $3 trillion of bank reserve balances – yielding a tidy return of more than $130 billion per year.
To justify all this, the Fed points to the usual bogeymen: runaway inflation, a wage-price spiral, and unanchored inflation expectations. But where are these bogeymen? Not only is inflation falling, but wages are increasing more slowly than prices (meaning no spiral), and expectations remain in check. The five-year, five-year forward expectation rate is hovering just above 2% – hardly unanchored.
The relationship between interest rates and unemployment
The impact higher interest rates can have on wage growth is one reason why many progressive economists, like Noble Prize winner Joseph Stiglitz, have urged the Federal Reserve to proceed with caution. Balancing the Fed’s approach to ensure that rates are not increased to points that will undermine the power of workers is critical to ensuring poor families are not sacrificed to get inflation under control.
If unemployment increases and fewer jobs become available because businesses enact hiring freezes, workers will be forced to accept lower wages. As record profits sore across industries, Stiglitz and others worry that higher rates will have the inverse effect and increase prices.
Have covid-19 supply chain issues been sorted
Global supply chains have "returned to normal," the Federal Reserve Bank of New York said on Monday, with pressures dropping to the lowest since before the pandemic.
Supply chain pressures have been a notable contributor to the high inflation seen around the world over the last few years.
Tax season is here, and many are evaluating eligibility for the Earned Income Tax Credit (EITC), which can greatly boost the size of one’s tax refund.
According to the IRS, in addition to submitting Form 1040: US Individual Income Tax Return (or Form 1040 SR, U.S. Tax Return for Seniors), a taxpayer with a “qualifying child [...] must also file the Schedule EIC (Form 1040 or 1040-SR), Earned Income Credit.”
Read our full coverage for details on how to apply for the EITC.
During Federal Reserve Chairman Jerome Powell’s opening remarks at his semi-annual economic updates to each chamber of Congress, he affirmed the central bank’s commitment to their dual mandate: “to promote maximum employment and stable prices.”
Last month, the unemployment rate in the United States fell to a historic low of 3.4 percent after the economy added over half a million jobs. These figures exceeded expectations and were paired with a 0.5 percent increase in the Consumer Price Index. These data points are evidence for Chairman Powell and Fed officials “that inflationary pressures are running higher than expected at the time of our previous Federal Open Market Committee (FOMC) meeting.”
Read our full coverage for details on how high economists and investors believe rates could go this year.
The latest statistics from the Labor Department found that hiring has slowed but still exceeded expert’s predictions last month. / Stefani Reynolds / AFP
Initial unemployment claims rose to 211,000 last week; total claims 1.7 million
The Department of Labor has reported an increase of 11,000 in the number of initial unemployment claims made last week. The total rose to 211,000, the highest level since late December.
Total claims data runs a week behind, and today the agency reported that for the week ending on 25 February, 1.7 million unemployment insurance claims were made. Like the data for initial claims, these levels had also decreased since December and are now on rising.
Which states saw the highest and lowest changes in the number of claims?
For the week ending on 25 February, Massachusetts (+4,438), Rhode Island (+1,210), New Jersey (+742), Arkansas (+619), and District of Columbia (+494), saw the highest increase in initial claims. On the other side of the spectrum, the largest decreases in claims were seen in Kentucky (-6,164), California (-2,844), Texas (-1,426), Ohio (-1,274), and Michigan (-1,020).
Food stamps, also known as the Supplemental Nutrition Assistance Program (SNAP), are a form of government assistance provided to eligible individuals and families to help them afford nutritious food.
To be eligible for SNAP benefits you must meet certain criteria, such as having a household income below a certain threshold, being a US citizen or legal immigrant, and meeting other program requirements. We take a look at how much is on offer for beneficiaries in 2023...
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What is the cheapest day to buy groceries? We explain which day of the week is the best for finding the lowest prices at the supermarket and why.
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Last year, inflation in the United States reached historic levels.
Given the high prices, several entities approved the sending of stimulus checks or tax refunds as relief. Although inflation has fallen in recent months, the support continues. We will share with you which states will send payments in March and what the amounts are.
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The SSA continues to issue increased social security payments of $1,800 and up and the exact shipping dates in March 2023 have been confirmed.
Every year, many Americans leave money on the table failing to claim tax credits that could reduce how much they owe to Uncle Sam, or even be fatten up their tax refund by thousands of dollars. Once such overlooked credit is the Earned Income Tax Credit (EITC), which is aimed at low-income workers and their families possibly worth almost $7,000.
College tuition inflation slower than that of overall inflation
High school students across the united States are deciding where they want to attend university next year. Besides the quality of education and reputation that each institution will provide, the price of tuition will play a role in that choice. The cost of attaining a four-year degree has been climbing around twice as fast as overall inflation for the past couple decades. However, the past three years have seen a reverse, with tuition rising just 4.7% compared with 15.7% in prices for all items over the same period.
While campaigning for the presidency in 2020, Joe Biden promised to enact widespread student debt relief if he won election. Yet after more than two years in the White House, there is still uncertainty regarding the future of President Biden's Student Loan Forgiveness progam.
The matter is currently being considered by the Supreme Court, leaving borrowers in limbo until the summer. What would happen if the Justices decide not to allow the program to go into effect?
The Child Tax Credit can be worth thousands of dollars for eligible families, provided that their tax dependents are below the age threshold.
The 2023 tax season is well underway, starting 23 January this year. The official deadline for most taxpayers to file 2022 tax returns is 18 April 2023, but those filers who need some extra time can file for an extension to get six extra months to pull papers together, but they will still need to pay any outstanding taxes owed by Tax Day. Already, millions of Americans have submitted their declarations and refunds are going out.
While refunds are expected to be smaller this year, as the covid-era financial assistance doled out through the IRS through beefed up tax credits and stimulus payments have ended. But there are still thousands of dollars that Americans may be eligible for this tax season to reduce their tax burden or even increase their refund. However, you can only claim a tax refund if you file a tax return, and meet the qualifications of course.
One such credit for taxpayers that can be worth up to $2,000 per eligible child is the Child Tax Credit. Here’s a look at how to claim the credit.
Rates will keep rising in 2023
With the labor market showing signs of strength, the central bank is laser-focused on bringing down inflation to stabilize prices.
In December, the FOMC projected that the median Federal Funds Rate (FFR) in 2023 would be 4.6 percent. After the Federal Reserve pushed up rates twenty-five basis points, they currently stand between 4.25 and 4.75 percent.
The Fed is set to announce further rate hikes in late March, and based on the projections and votes of FOMC members in December, the new median could be shifted to five percent or higher.
During Federal Reserve Chairman Jerome Powell’s opening remarks at his semi-annual economic updates to each chamber of Congress, he affirmed the central bank’s commitment to their dual mandate: “to promote maximum employment and stable prices.”
Chairman Powell informed congressional leaders that FOMC will likely raise interest rates to levels " higher than [they] previously anticipated.”
Jonathan Ernst / REUTERS
Federal Reserve
The Federal Reserve has released the March 2023 Beige Book, which reports on economic conditions across the country. The information is collected through the various districts that make up the Federal Reserve network.
"Several Districts indicated that high inflation and higher interest rates continued to reduce consumers’ discretionary income and purchasing power, and some concern was expressed about rising credit card debt," reads the report.
In many districts current economic conditions are reducing household savings, leading to increased vulnerability throughout the economy. If inflation does not come down and wages continue to fall, many households may face significant challenges if a recession materializes towards the end of this year or early next. Additionally, small and medium sized banks are reporting a drop off in loan demand as rates price many could-be borrowers out of the market.
Layoffs increased in January, reached highest level since November 2020
Layoffs in the US in January hit 1.7 million, the highest level since November 2020, when another wave of covid-19 led to a minor wave in firings.
The 1.7 million figure is more aligned with the levels tracked before the pandemic, where in January 2020, the economy saw 1.8 million involuntary removals from the workforce. The increase, coupled with the fact that voluntary quits dropped as well, shows that businesses may be starting to react to higher interest rates.
Quits had come in over four million since May 2021, so the 3.8 million figure marks a shift in the labor market --however marginal.
Check out the BLS report for more information.
Welcome to AS USA
Hello and welcome to AS USA financial blog, where we'll bring you all the latest news on measures to tackle inflation, financial support to cope with rising prices and the effects of interest rate hikes.