Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Federal Government Posts Largest Deficit in Six Years

  by    0   0

The federal debt spiral continues.

The 2018 fiscal year ended Sept. 30 and the US government closed out the year with its largest budget deficit since 2012. Uncle Sam ended 2018 $779 billion in the red, adding to the ballooning national debt.

A combination of new federal spending and shrinking revenue due to the tax cuts accounted for the large deficit.

Meanwhile, the national debt expanded by more than $1 trillion. According to data released by the Treasury Department, it was the sixth-largest fiscal-year debt increase in the history of the United States. (If you’re wondering how the debt can grow by a larger number than the annual deficit, economist Mark Brandly explains here.)

According to the Treasury Department, the 2018 fiscal deficit was $113 billion (17%) larger than the 2017 deficit. If you adjust for calendar effects (for instance, revenues come in higher during months when quarterly tax filings come due) the gap between fiscal 17 and fiscal 18 came in even larger.

According to Reuters, the Bipartisan Policy Center called the Treasury report a “wakeup call.”

The fact that our government is closing in on trillion-dollar deficits in the midst of an economic expansion should be a serious issue for voters and candidates.”

Although the economy is supposedly in the midst of a boom, US government borrowing looks more like we’re in the midst of a deep recession. Long-term US debt sales have risen to a level not seen since the height of the financial crisis.

According to the report, the rising cost of servicing existing debt also contributes to the escalating deficits. Interest payments continue to rise as rates go up. This is partly a function of intentional Federal Reserve tightening and partly a function of normal supply and demand. Earlier this year, the US Treasury Department said it planned to auction off around $1.4 trillion in Treasuries in 2018 alone. And it won’t end there. The department expects that pace of borrowing to continue over the next several years.

Obviously, rising interest rates aren’t good news when you’re trying to finance increasing levels of debt. Growing debt coupled with soaring interest payments creates a vicious upwardly spiraling cycle. As debt grows, it costs more money to service it. That requires more borrowing, which adds to the debt, which increases the interest payments — and on and on it goes.

Annual interest payments already approach $500 billion. Every uptick in the interest rate increases that number. At the current trajectory, the cost of paying the annual interest on the US debt will equal the annual cost of Social Security within 30 years.

American consumers face a similar problem.  Total consumer credit rose to a record $3.94 trillion in August, according to the latest numbers from the Federal Reserve.

Office of Management and Budget Director Mick Mulvaney said economic growth spurred by the tax cuts will close the budget gap.

America’s booming economy will create increased government revenues – an important step toward long-term fiscal sustainability.”

But will we actually get the promised growth as the debt continues to swell?

As we’ve reported previously, high levels of debt are cancer on economic growth. Several studies have estimated that economic growth slows by about 30% when the debt to GDP ratio rises about 90%. Most analysts say the US economy is already in the 105% range. Most economists believe the tax cuts have boosted the economy, but the boost will likely be short-lived unless Uncle Sam gets his spending problem under control.

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

July Budget Deficit “Only” $63 Billion

The federal budget deficit for July was only $63 billion, according to the latest Monthly Treasury Statement issued by the Treasury Department. Of course, $63 billion is a huge budget shortfall. I say “only $63 billion” simply because it pales in comparison to the $864.1 billion deficit in June. In reality, the July deficit continues […]

READ MORE →

Status Report: Sound Money in the States

If you want to end unconstitutional, overreaching federal power – end the Fed. It’s the engine that drives the most powerful government in the history of the world. But Congress will never abolish the central bank. It can’t even come up with the will to audit the Fed. So what can we do? There are actually […]

READ MORE →

Central Banks Add More Gold in June

Central banks added another net 18.1 tons of gold to their reserves in June, according to the latest data from the World Gold Council. The net total was pulled down by a significant sell-off by Columbia’s central bank.

READ MORE →

ETF Gold Holdings Increase for Eighth Straight Month

ETFs globally added another 166 tons of gold in July. It was the eighth straight month of inflows of metal into gold-backed funds. That pushed total ETF gold holdings to another record high of 3,785 tons, according to the latest data from the World Gold Council. With gold hitting an all-time record high at the […]

READ MORE →

Silver Breaks Above $28 an Ounce

The price of silver broke above $28 an ounce Thursday morning. In the last 30 days, silver has gone up by nearly 54%. On the year, the white metal is up over 71%. Even with these big gains, silver remains historically undervalued compared to gold.

READ MORE →

Comments are closed.

Call Now