A couple of weeks ago, the national debt blew past $35 trillion. There were a few articles bemoaning the ballooning debt, but no substantive calls to rein it in. Meanwhile, the Biden administration continues to spend America into oblivion.
The July deficit came in at $243.7 billion, according to the latest Treasury Statement. That ran the fiscal 2024 deficit to $1.52 trillion with two months remaining.
Keep in mind that the Biden administration is running this massive budget shortfall despite what is supposed to be a “strong and resilient” economy.
The Treasury reported $330.4 billion in receipts in July. That was a 19.6 percent revenue increase compared to July 2023.
Last month’s year-on-year revenue increase wasn’t an anomaly. To give you an idea of how well the Treasury is doing, in April, Uncle Sam ran a surplus thanks to tax day. Tax receipts came in at $776.2 billion in April, a 22 percent increase over last year.
This obliterates the idea parroted by Democrats that the deficits are because of tax cuts. The real problem is on the spending side of the ledger.
Case in point: The Biden administration blew through another $574.1 billion last month alone.
Remember how the Biden administration promised that the [pretend] spending cuts would save “hundreds of billions” with the debt ceiling deal (aka the [misnamed] Fiscal Responsibility Act)?
That never happened.
Spending in July was up 15.5 percent over last year.
So far, the Biden administration has spent a staggering $5.6 trillion.
Don’t think I’m just picking on Biden and the Democrats. They just happen to be the ones currently driving the car toward the cliff. Things weren’t much better when Trump was at the wheel.
Before the pandemic, the U.S. government had only run budget deficits of over $1 trillion four times — all by the Obama administration in the aftermath of the 2008 financial crisis.
The Trump administration almost hit the $1 trillion mark in 2019 and was on pace to run a trillion-dollar deficit in fiscal 2020 before the pandemic, even as the U.S. supposedly enjoyed the “best economy” ever. The economic catastrophe caused by the government’s response to COVID-19 gave policymakers an excuse to spend with no questions asked and we saw record deficits in fiscal 2020 and 2021.
This reveals the ugly truth; borrowing and spending is a bipartisan sport. No matter who is in power or what you hear about spending cuts in Washington D.C., the federal government always finds new reasons to spend more and more money. Whether it’s a disaster, an emergency, or somebody else’s war, the spending train never reaches the station.
The Interest Problem
Spiraling debt and higher interest rates are creating a double whammy that is on the verge of overwhelming the federal budget.
Last month, the U.S. government spent $88.5 billion just paying interest on the national debt. This number is lower than the average in recent months because some of July’s interest was paid in June due to calendar effects. Even so, interest expense was more than national defense ($71 billion) and nearly as much as Medicare ($92 billion).
So far in 2024, Uncle Sam has forked over $956.3 billion to pay interest. That’s over 23 percent of all taxes collected this year. The only spending category bigger than interest on the debt is Social Security.
And interest expenses will only continue to climb.
Much of the debt currently on the books was financed at very low rates before the Federal Reserve started its hiking cycle. Every month, some of that super-low-yielding paper matures and has to be replaced by bonds yielding much higher rates.
Anybody who says “deficits don’t matter” is deluded.
And the only way out of this fiscal death spiral is significant spending cuts and/or major tax hikes.
I wouldn’t hold my breath.
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