Fiscal 2019 ended Sept. 30 with the biggest budget deficit in seven years, with the shortfall coming in just a hair under $1 trillion.
And we’re already on track to top that. Just two months into fiscal 2020, the budget deficit is already 12% bigger than it was this time last year and is hurtling toward that $1 trillion mark.
The federal budget deficit for November came in at $208.8 billion, according to the latest Monthly Treasury Statement. That was 2% higher than the November 2018 deficit. The deficit through the first two months of FY2020 stands at $343.3 billion. That’s a 12% increase over the same period in fiscal 2019.
The FY2019 budget deficit came in just a hair under $1 trillion at $984 billion. That amounted to 4.7% of GDP, the highest percentage since 2012. It was the fourth consecutive year in which the deficit increased as a percentage of GDP. The debt-to-GDP ratio is estimated to have increased a hefty 26% over last year.
The US government is on track for a deficit of over $1 trillion in this fiscal year. It has only run deficits over $1 trillion four times, all during the Great Recession. We’re approaching that number today, despite what Trump keeps calling “the greatest economy in the history of America.”
Spending is the problem. Treasury receipts were up 9% last month, but Uncle Sam blew through $434 billion. That was 6% above spending in November 2018. In just two months, the Trump administration spent $814 billion.
There is no end in sight to the spending. Congressional leaders and the Trump administration are currently putting the finishing touches on a $1.4 trillion spending deal that will almost certainly expand deficits further. According to an Associated Press report, the deal “fills in the details of a bipartisan framework from July that delivered about $100 billion in agency spending increases over the coming two years instead of automatic spending cuts that would have sharply slashed both the Pentagon and domestic agencies.”
The bipartisan framework that Trump signed over the summer suspended the borrowing limit for two years and increases discretionary spending from $1.32 trillion in FY2019 to $1.37 trillion in fiscal 2020. The deal then boosts spending again to $1.375 trillion the year after that. The spending plan – that Trump signed – increases both domestic and military outlays. And it appears the actual 2020 spending blueprint will come in even higher than that summer agreement outlined.
The national debt increased by $1.2 trillion in fiscal 2019, according to Treasury Department data and has since pushed above $23 trillion.
To put that into perspective, just last February, the national debt topped $22 trillion. When President Trump took office in January 2017, the debt was at $19.95 trillion. That represented a $2.06 trillion increase in the debt in just over two years. The borrowing pace continues to accelerate. The Treasury borrowed $800 billion in just two months between Aug. 1 and Oct. 6. (If you’re wondering how the debt can grow by a larger number than the annual deficit, economist Mark Brandly explains here.)
Politicians and pundits tend to basically ignore government spending and the ever upward-spiraling national debt. They say it doesn’t really matter. The debt has been increasing for years and nothing has happened. But we know for a fact government debt and spending retard economic growth. Europe’s spending binge and its economic malaise serve as a prime example.
Meanwhile, the Federal Reserve has resumed monetizing the US debt with quantitative easing – even though it won’t call it QE. Ironically, a paper by Scott A. Wolla and Kaitlyn Frerking for the Federal Reserve Bank of St. Louis warned that this Fed policy could lead to “economic ruin.”
The out of control spending and spiraling deficits are concerning enough on their own terms, but they become absolutely horrifying when you consider that these budget shortfalls are happening during a period of economic expansion. You would normally expect numbers like this during a major recession.
That raises an important question: what’s going to happen when the recession hits?
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