The Treasury ran a budget deficit of $193B in the month of March. This exceeded the 12-month average of $144B.
Over the last year, the Treasury has seen a massive influx of Individual tax revenues that have helped support the ballooning Federal Deficit. Unfortunately, spending has been so high that the additional revenue did not give much reprieve, causing the Treasury to borrow $2.27T over the last 12 months.
The US Treasury added $111 billion in debt during March. Meanwhile, rising interest rates are already creating problems for Uncle Sam. Annualized interest on the US debt has increased by over $16 billion in just six months. Following is an analysis of US debt holdings.
The US Treasury realized a monthly surplus of $118.7 billion in January. It was the first budget surplus since September 2019 and the largest since it realized a $160 billion surplus in April of 2019.
The surplus was driven by high revenue from a continued surge in Individual Taxes. This was combined with shrinking expenditures due to the expiration of the child tax credits that ended on December 31. The surplus for the month also was helped by $70 billion in proceeds from a wireless spectrum auction.
In the calendar year 2021, federal tax revenues surged by an incredible 25% compared to 2020 and were up 22.8% over 2019 (pre-COVID). But the surge in tax revenues was not enough to overcome a record $6.8 trillion in spending, breaking the spending record set in 2020 by 1.6%.
The federal government continues to run big budget deficits as spending skyrockets. Increasing tax revenues are the only thing keeping the deficits from blowing up even further. But how long will this tax windfall last?
Similar to August and September, the total national debt has not increased due to the current debt ceiling that’s in place. Similar to August, the Treasury has raided public retirement accounts to continue funding government spending (light green bar below).
Looking at the bigger picture, Covid has forever shifted the landscape of US Debt.
The federal budget deficit in October came in at $165 billion. That represents a staggering 36.8% of total expenditures for the month.
This is slightly below the 12-month average where the deficit represented 39.3% of total expenditures. Over the twelve-month period, the total deficit was $2.65 trillion driven by total expenditures that reached $6.7 trillion.
The following analysis breaks down the huge October federal budget deficit and sets it in historical context.
The Fed balance sheet stands at $8.33 trillion, up $111 billion from the prior month-end.
The chart below shows how the Fed Balance sheet has grown by instrument over the last 18 months. The major surge from COVID can be clearly seen as $2.5T was added within 2 months. The monthly changes since then reflect QE on autopilot.
The mainstream narrative is that the Fed will soon admit that inflation isn’t transitory. At that point, it will raise interest rates and taper its bond-buying program to fight rising prices. But this narrative ignores the elephant in the room – the ever-increasing national debt.
In June, the US government ran another big deficit of $174.16 billion, continuing the trend of overspending and massive budget shortfalls.
The US and China are reportedly getting closer to working out a trade deal. The Chinese have indicated they will import more US natural gas, semiconductors and soybeans. Peter Schiff recently appeared on RT to talk about it. He said that no matter what ultimately comes out of these trade negotiations, it’s not going to make America great again.
