Federal Budget Deficit Continues Its Relentless Upward Spiral
The US government ran a $170.64 billion budget deficit in August, pushing the total fiscal 2021 budget shortfall to $2.71 trillion with one month to go, according to the latest Monthly Treasury Statement.
The mainstream media spun this as good news, noting that the August deficit was 15% lower than the $200 billion spending gap a year ago. This was primarily a function of higher revenues in August 2021 compared to last year. But digging deeper into the numbers reveals the US government hasn’t exactly slowed down its out-of-control spending spree, with spending last month also up compared to last year.
The US government reported receipts of $268.38 billion in August. That was a 20% increase compared to August of last year.
Meanwhile, Uncle Sam spent $439.01 billion last month. Spending was nearly 4% higher than last year when the country was still deep in the COVID-19 recession, even with approximately $59 billion in August benefits paid in July with the month starting on a non-business day.
Total spending for fiscal 2021 now stands at a staggering $6.3 trillion.
Even without additional stimulus in the coming year, spending doesn’t appear set to slow much. Congress is on its way to passing a $1 trillion infrastructure bill, and Biden’s 2022 budget tops out at over $3.5 trillion in spending. The Biden budget would take the US to its highest sustained spending levels since World War II. And the Democrats will almost certainly find news spending needs in the coming year.
As of July 12, the national debt stood at $28.43 trillion. The debt is currently frozen at that level with the 2-year debt ceiling suspension ending on July 31. Congress is set for another debt-ceiling fight that will ultimately raise the federal borrowing limit again. The government can limp along with the ceiling in place temporarily using “extraordinary measures.” Congressional Budget Office projects Uncle Sam will run out of money this fall, likely in October or November.
Congress will almost certainly run the debt ceiling saga to the brink, but it will undoubtedly raise the spending limit. When it does, the Treasury Department will go on another massive borrowing binge. That means the government will need to continue borrowing and it will need the central bank to keep its thumb on the bond market through Treasury purchases to make that possible. This is why Peter Schiff doesn’t expect any tapering of the Federal Reserve’s quantitative easing program to last very long. He told RT Boom Bust the Fed will ultimately expand QE.
It knows the only foundation this bubble economy has is the Fed’s easy money policies. And I don’t think they have any actual plans to taper. And even if they just kind of feign the process by beginning it, they’ll never complete it because soon after they start the taper, again, if they even ever start, they’re going to have to reverse the process. Because ultimately, the Fed Fed is going to expand the QE program and start to buy a lot more government Treasuries and mortgage-backed securities in the future than it’s doing right now.”
According to the National Debt Clock, the debt to GDP ratio is 125.79%. Despite the lack of concern in the mainstream, debt has consequences. More government debt means less economic growth. Studies have shown that a debt to GDP ratio of over 90% retards economic growth by about 30%. This throws cold water on the conventional “spend now, worry about the debt later” mantra, along with the frequent claim that “we can grow ourselves out of the debt” now popular on both sides of the aisle in DC.
Currently, every American citizen would have to write a check for $86,279 to pay off the national debt. It would cost every taxpayer $228,332.
