This month we have a variation on a theme – the U.S. government spends more money than it has and runs up another massive budget deficit. Some things never change.
In June, the US government ran another big deficit of $174.16 billion, continuing the trend of overspending and massive budget shortfalls.
With three months remaining in fiscal 2021, the budget deficit stands at a staggering $2.24 trillion, according to June Monthly Treasury Statement.
Despite the fact that the economy has opened back up and the pandemic has receded, for the time being, the U.S. government continues to run massive budget deficits month after month after month.
Uncle Sam spent $623 billion in June, a 4.3 percent increase over May’s outlays. That’s over half a trillion dollars in federal spending in just one month. Total spending for fiscal 2021 now stands at $5.29 trillion. Spending is up 6 percent in fiscal 2021 compared to the same period last year.
And you thought spending would go back to “normal” after the pandemic.
Welcome to the new normal. Which is really an awful lot like the old normal.
Republican partisan hacks will pin the blame on Joe Biden, but President Trump oversaw massive budget deficits as well. In fact, when Trump was bragging about the greatest economy in history, his administration was running a budget deficit of just a hair under $1 trillion.
The Treasury received $449 billion in June. Treasury receipts were bolstered by the late tax filing deadline this year.
As of July 12, the national debt stood at $28.49 trillion.
According to the National Debt Clock, the debt to GDP ratio is 128.23%. Despite the lack of concern in the mainstream, debt has consequences. More government debt means less economic growth. Studies have shown that a debt to GDP ratio of over 90% retards economic growth by about 30%. This throws cold water on the conventional “spend now, worry about the debt later” mantra, along with the frequent claim that “we can grow ourselves out of the debt” now popular on both sides of the aisle in DC.
There is no sign that the federal government plans to rein in spending any time soon. Congress continues to wrangle over an infrastructure deal with a $2 trillion price tag. President Biden has also pitched “free” community college and childcare. This all piles on top of the $6 trillion in spending packed into the proposed 2022 budget. Biden has pitched a number of corporate and individual tax increases to pay for the spending, but he’s already had to back off on some of the taxes due to political pressure. That means most of this borrowing and spending will continue to be paid for through an inflation tax that will hit us as the Federal Reserve monetizes this massive debt. That means more bond purchases and more money printing.
Currently, the average American doesn’t really feel the impact of federal spending. Taxes remain low (relatively speaking). The Treasury simply borrows the money and the central bank monetizes the debt. But borrowed money has to be paid back. You will pay the bill – whether through higher taxes down the road or the inflation tax inherent in the Fed’s debt-monetization scheme. And in reality – both.
The post Some Things Never Change first appeared on Tenth Amendment Center.
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