The Biden administration ran the biggest monthly budget deficit of the year in May as it continues to spend money hand over fist.
Federal spending overshot receipts by $347.13 billion last month, despite a 5 percent increase in revenues, according to the Monthly Treasury Statement.
The deficit was the largest ever recorded in May and was up 22 percent from the same period last year.
Part of the big increase was due to $93 billion in June payments that were pushed back into May because June 30 fell on a Saturday. But even subtracting that amount out, the deficit was still $254 billion, the third-largest shortfall so far in fiscal 2024.
The May deficit pushed the fiscal 2024 budget deficit to $1.2 trillion with four months remaining. The 2024 deficit is about 3 percent ahead of the shortfall during the same period last year.
A lot of people like to blame America’s fiscal deterioration on tax cuts. But revenues are up. The real problem is on the spending side of the ledger.
Government receipts came in at $323.65 billion in May, a 5 percent year-on-year increase. Year-to-date receipts totaled $3.29 trillion, up 10 percent from the same period in fiscal 2023.
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.
But then there’s the spending.
The Biden administration blew through $670.78 billion in May. Even subtracting the $93 billion in June entitlement payments pushed back into May, Uncle Sam still spent well over half a trillion dollars.
Through the first seven months of fiscal 2024, the federal government has blown through a staggering $4.49 trillion. That’s up 8 percent over the same period last year.
And there is no end to the spending in sight.
Outlays continue to increase despite the [pretend] spending cuts and promises from the Biden administration that it would save “hundreds of billions” with the debt ceiling deal (aka the [misnamed] Fiscal Responsibility Act).
This reveals the ugly truth. No matter 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.
This problem isn’t specific to Biden or Democrats in general. The Trump administration was running $1 trillion deficits before the pandemic. In other words, Trump was generating Obamaesque deficits despite having what he claimed was the strongest economy in history.
Borrowing and spending is a bipartisan sport.
The problem is the only way to whittle down spending would be to address the biggest outlays – entitlements, national defense, and the interest on the debt. Congress lacks the political will to cut defense or reform Social Security and Medicare. And it can’t do anything about the interest on the debt other than lower the debt.
Speaking of the debt, massive monthly budget shortfalls are pushing it higher at a dizzying pace. On December 29, the national debt eclipsed $34 trillion for the first time. When Congress effectively eliminated the debt ceiling on June 5, the national debt stood at a “mere” $31.46 trillion. As of June 13, the national debt stood at over $34.68 trillion.
But the Debt Doesn’t Matter!
A lot of people just shrug at the deficits and ballooning national debt, claiming “it doesn’t matter.” They insist that as long as the U.S. government issues its own currency, and the dollar remains the global reserve, the government can borrow and spend virtually at will. They use fancy accounting tautologies to “prove” their point.
But intricacies of monetary theory aside, their supposition only holds up as long as the world has faith in the dollar. That faith is being eroded by the federal government’s reckless and irresponsible policies. This is evident by the de-dollarization trend.
And then there is the interest problem.
The U.S. government spent $103 billion on interest expenses alone in May. This was more than the amount spent on national defense ($87 billion). The only spending categories higher than interest expense were Social Security and Medicare. Keep in mind that entitlement spending was boosted by early June payments that fell in May.
The government has shelled out $727.5 billion on interest payments so far in fiscal 2024. That’s a 37.3 percent increase over the same period in fiscal 2023. The only category with higher spending was Social Security.
Net interest expense, excluding intragovernmental transfers to trust funds, was $601 billion through the seven months of the fiscal year. Net interest expense for the year has now eclipsed the outlays for national defense ($576 billion).
To put this into a different perspective, the federal government is spending over 1/3 of its tax receipts on interest expense alone.
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.
********
