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Budget Deficit: Is the Surge In Tax Revenues Over?

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The Federal Government ran a deficit of $249 billion in November. This is the highest monthly deficit since July 2021 if you ignore the one-time student loan forgiveness-driven deficit in September.

Note: it’s possible the Supreme Court could strike down the student loan forgiveness program

One of the biggest drivers of the expanding deficit is a fall in Individual Income Taxes. The surge in tax revenue had been a huge windfall for the government over the last two years, but that appears to be fading.

Figure: 1 Monthly Federal Budget

Looking historically at November shows that this is the largest November deficit ever recorded! It has even exceeded the 2020 and 2021 Covid deficits.

Figure: 2 Historical Deficit/Surplus for November

For the decade before Covid, November averaged a deficit of -$145B, which makes Nov 2022 more than 70% larger than the average November deficit.

Figure: 3 Current vs Historical

The Sankey diagram below shows the distribution of spending and revenue. The Deficit represented nearly 50% of total spending! Extrapolating November out would mean a deficit of almost $3T!

Figure: 4 Monthly Federal Budget Sankey

Looking at the TTM, the November Deficit was nearly twice the size of the Deficit over the last 12 months on a relative basis. Keep in mind, the TTM Deficit was still a whopping $1.35T or 21.7% of total spending.

Figure: 5 TTM Federal Budget Sankey

Total revenue fell for the second month in a row. The main driver was a fall in tax revenue from Corporate taxes and Individual income taxes. In fact, Individual Tax revenue fell to the lowest amount since November 2020.

Figure: 6 Monthly Receipts

Total Expenses were in-line with where it has been over the past 18 months, so there was no big spending that can be attributed to the surge… this is definitely from the revenue side.

Figure: 7 Monthly Outlays

One expense to keep an eye on though is the Net Interest Expense. As covered in the debt analysis, Net Interest costs have been exploding upwards.

TTM Net Interest Expense has just passed $500B for the first time ever. This is up an incredible 62% since April 2021. Unfortunately for the Treasury, this surge is showing no signs of abating anytime soon without a massive pivot from the Fed.

Figure: 8 TTM Interest Expense

The table below goes deeper into the numbers of each category. The key takeaways from the charts and table:


    • YoY all but two expenses increased
        • Only National Defense and Income Security saw a fall in costs
        • Net Interest and Education are both up over 50%!
    • On a TTM basis, only Income Security and Other (Stimulus Checks) saw decreases


    • Only Social Security saw a MoM increase
    • Compared to the average over 12 months, every single revenue source has fallen
    • On a TTM basis, nearly every revenue category is still increasing
        • Individual Income Taxes is up 67% from Nov 2020 TTM
        • As mentioned, current months suggest the tax surge is slowing


    • The Total TTM Deficit was still $1.35T despite falling 50% since 2021 when Covid stimulus was still driving the deficits higher
    • Receipts were up 18% on a TTM basis vs a fall in spending by 8.7%

Figure: 9 US Budget Detail

Historical Perspective

Zooming out and looking over the history of the budget back to 1980 shows a complete picture. It shows how a new level of spending has been reached that is being supported by a major surge in tax revenues. The blue bars on the far right show that the surge has definitely plateaued.

Figure: 10 Trailing 12 Months (TTM)

The next two charts zoom in on the recent periods to show the change when compared to pre-Covid.

As shown below, total Receipts have surged higher in recent years. The current 12-month period is $1.52T bigger than 2020. Individual Taxes make up the vast majority of the difference, with 2022 exceeding pre-Covid 2019 by $900B.

Figure: 11 Annual Federal Receipts

Despite no stimulus spending over the last 12 months (except for the Student Loan Forgiveness), spending is almost $2T higher than 2019.

Figure: 12 Annual Federal Expenses

Despite massive expenditures driving huge deficits, the Deficit is down YoY as mentioned above. This has brought the TTM Deficit compared to GDP down to pre-Covid levels of 5.3%.

Note: GDP Axis is set to log scale

Figure: 13 TTM vs GDP

Finally, to compare the calendar year with previous calendar years (not fiscal budget years), the plot below shows the YTD numbers historically. The current year’s deficit sits only behind 2009, 2020, and 2021.

Figure: 14 Year to Date

Wrapping Up

The Treasury is hitting a perfect storm of bad outcomes right now:

    • Surging interest rates are creating a huge increase in Net Interest Expense
    • The ongoing recession has taken a major bite out of tax revenues
    • Current spending has reached a new level that now exceeds $6T

Given the current dynamics, it’s not impossible that the Federal Government actually runs a deficit that exceeds the Covid deficits in the near future. Who is going to absorb all the new debt that has to be issued?

As the recession deepens, things are only going to get worse for the Treasury and the economy. The Fed has its final meeting of the year this week. No doubt they will try and toe the line of being dovish but sounding hawkish. It won’t be enough though.

The economy is teetering and needs Fed easy money to avoid a complete meltdown. The Fed will talk tough up until the moment things fall apart and then they will pivot fast and hard. The US Treasury will not be where things break, it will happen somewhere else first. Given the Treasury only has about 9 months before really spiraling, expect a major event in the economy somewhere in the next 3-6 months (or sooner).

When things break and the Fed pivots, gold, and silver are going to take off. That’s why physical supplies are disappearing at record rates. Get yours while you still can!

Data Source: Monthly Treasury Statement

Data Updated: Monthly on eighth business day

Last Updated: Period ending Nov 2022

US Debt interactive charts and graphs can always be found on the Exploring Finance dashboard:

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