The Fiscal Deficit Is Growing Faster Than Tax Receipts, GDP, National Income, You Name It...
Trump/Mnuchin, Biden/Yellen, Congress and the Fed are all to blame for the price inflation that has plagued the United States.
The U.S. is on track for a $2 Trillion-plus deficit in fiscal 2024, which would mean Treasury debt outstanding would grow by at least $2 Trillion from the current $34.3 Trillion level. Fiscal year-to-date, the Federal Government has spent $532 billion more than it has collected in tax revenue. That $532 billion year-to-date deficit is 16% higher than the deficit over the same period a year ago.
No deficit level is acceptable as money must be printed to cover the deficit. The very act of printing that money reduces the purchasing power of money in circulation. The extreme fiscal spending and money printing of recent years is why prices for goods and services have increased sharply since 2021. Trump/Mnuchin, Biden/Yellen, Congress and the Fed are all to blame for the price inflation that has plagued the United States. All have refused to get fiscal spending under control (Powell and the Fed have enabled extreme fiscal spending levels by subsidizing Treasury debt).
For perspective, if the $34.3 Trillion in Treasury debt outstanding rolled over at 5.5% (Fed Funds rate), that would translate to interest expense of $1.7 Trillion, which is 39% of what the Federal Government collected in tax revenue in fiscal 2023. Another $2 Trillion of debt would increase the annual interest expense to $1.8 Trillion at 5.5%.
The U.S. is approaching a situation where 50% of all tax revenue collected each year will go out the door to pay down interest expense. Interest expense is shaping up to be the largest fiscal spending category, unless of course the Fed was to significantly reduces its Fed Funds rate.
The Federal Government has spent $2.1 Trillion fiscal year-to-date (since October 2023). Here are the top 10 spending categories year-to-date:
Forgive me if I believe that Treasury yields should be higher. Who would not want more compensation for holding long-term Treasuries given that the Federal Government is technically bankrupt were it not for its ability to print money out of thin air - money that is less valuable with each subsequent printing.