Feds Run Second-Biggest Budget Deficit in History; Spending Up from 2020 Record
The federal budget deficit for fiscal 2021 came in at $2.77 trillion. It was the second-largest deficit in US history, just behind last year’s $3.13 trillion shortfall. Despite falling shy of the deficit record, Uncle Sam spent even more money in 2021 than it did during the depths of the 2020 coronavirus recession.
The US government managed to run yet another massive deficit during fiscal 2021 despite increased tax receipts as the economy began to recover after last year’s COVID-19 lockdowns. Government receipts were up 14.4% in the last fiscal year, coming in at $4.05 trillion. That compares with $3.42 trillion in revenue the previous year.
Meanwhile, federal spending was up 4.2%. Uncle Sam blew through $6.82 trillion over the last 12 months, compared with $6.55 trillion in fiscal 2020.
Even without additional stimulus in the coming year, spending doesn’t appear set to slow much. Congress continues to debate a massive 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 October 21, the national debt stood at $28.88 trillion. The US government added some $450 billion to the debt over the last couple of weeks after Congress passed a bill increasing the federal debt ceiling by $480 billion. The government can limp along with the current ceiling in place temporarily using “extraordinary measures.” Uncle Sam will run out of money in early December.
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. Federal Reserve Chairman Jerome Powell has said that it’s time to begin tapering asset purchases. But Peter Schiff doesn’t expect any tapering of the Fed’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 126.04%. 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.
Every American citizen would have to write a check for $86,821 in order to pay off the national debt.