Government posts largest October budget deficit in history – Dateway

If you thought the federal government might try to limit spending after running a budget deficit of $ 3.13 trillion in fiscal 2020, you were deeply disappointed.

Uncle Sam hasn’t given up on his spending habit.

October was the first month of fiscal 2021 and the federal government kicked off the year with a budget deficit of $ 284.1 billion, according to the latest monthly Treasury statement. It was the largest October budget deficit in American history.

The federal government spent $ 522 billion last month. This was a 37.3% increase from October 2019.

Meanwhile, government revenues fell 3.2% from last year.

There is a small caveat. On November 1 falling on the weekend, the Treasury pushed spending for active military service and retirement, veterans benefits, supplemental security income, and Medicare payments back into October. This inflated the expenses for the month. As a result, we might see a smaller deficit in November. Or not.

Regardless, the schedule changes do not account for all of the large increase in spending.

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Here’s a little perspective. This October deficit was more than double the budget deficit for October 2019. And last month’s deficit was almost half of the total deficit for all of 2016.

Most people ignore these massive deficits, believing that they are just the product of the economic problems caused by the coronavirus. But the pandemic covered up a horrific truth – the federal government was in near record deficit territory before COVID-19 arrived on the scene.

In fiscal 2019, the Trump administration recorded a deficit of $ 984 billion. At the time, it was the fifth-largest deficit in history. The upward trajectory continued into the first two months of fiscal 2020, with a budget deficit of 12% from the massive number in 2019. The 2020 deficit was on track to eclipse $ 1 trillion. before the pandemic. Prior to 2020, the US government had only run deficits of over $ 1 trillion four times, all during the Great Recession. We were approaching that number before pandemic, despite what Trump kept calling “the greatest economy in American history.”

In October, the national debt jumped by over $ 27 trillion.

According to a CBO report, on the current trajectory, the size of the national debt will be almost double the size of the US economy by 2050.

A lot of people claim that massive deficits and skyrocketing debt don’t matter. After all, the US government has been borrowing money for decades, and the doomsday predictions have not come true. But debt is neither free nor trivial. The borrowed money must be repaid – either through taxation or inflation – which is nothing more than a hidden tax.

Debt also retards economic growth. Studies have shown that a debt-to-GDP ratio above 90% retards economic growth by about 30%.

You can try to hide soaring deficits and skyrocketing debt by arguing that it is “necessary” to fight the coronavirus. The excuse certainly creates good political cover for spendthrift politicians in both political parties. But you can’t hide the economic consequences of overspending and debt. There is no free lunch – even if you own a cash press.

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