On Tuesday, the national debt pushed above $26 trillion.
Just 35 days ago, the debt eclipsed $25 trillion. And 28 days before that, the national debt stood at a “mere” $24 million.
Meanwhile, the Trump administration just set a record for the biggest budget deficit in any fiscal year — with four months left to go.
May’s budget shortfall came in at a staggering $398.8 billion, pushing the fiscal 2020 deficit to $1.88 trillion, according to the latest monthly US Treasury Department statement.
The previous budget deficit record for any year was $1.4 trillion in FY 2009. Before this year, the federal government had run deficits over $1 trillion in just four fiscal years, all during the Great Recession.
Peter Schiff added some additional perspective in a tweet.
It took the nation 210 years to run the National Debt up to $2 trillion. It took exactly 2 months and 2 days to add the most recent $2 trillion.”
It’s important to note that this isn’t fundamentally a problem caused by coronavirus. The spending and debt were an issue before the pandemic. And it wasn’t something that ended with Obama.
The fifth trillion-dollar deficit was coming down the pike this year even before the massive stimulus spending in response to coronavirus. In effect, the federal government was already engaged in fiscal stimulus despite what Trump kept calling “the greatest economy in the history of America.” The deficit featured numbers you would expect to see during a massive economic slowdown — before the pandemic. Response to the coronavirus just put spending and debt in hyperdrive.
The May budget deficit highlights just how out of control things have become.
For the month of May, receipts to the U.S. Treasury fell 25 percent to $174 billion. There was a 16 percent drop in individual withheld taxes and a 62 percent drop in corporate income tax payments. This reveals just how much the coronavirus-induced government shutdowns squeezed the economy.
Spending in May came in at $573 billion. Year-to-date, Uncle Sam has spent $3.9 trillion. And these numbers don’t even include outlays for forgivable small business loans. A Treasury Department official told Reuters those numbers will show up in the budget as loans are forgiven between the end of June and late October.
More spending could be coming down the pike. Last week, President Donald Trump pushed for more stimulus, including a payroll tax cut.
According to the National Debt Clock, the debt to GDP ratio has risen to over 130.46 percent. Studies have shown that a debt to GDP ratio over 90% retards economic growth by about 30 percent.
During a press conference after the June FOMC meeting, Federal Reserve Chairman Jerome Powell indicated that the central bank has no plans to roll back its extraordinary monetary policy any time soon. Powell said the Fed was committed to “do whatever we can, for as long as it takes,” and, “We’re not even thinking about thinking about raising rates.” And no wonder. With this level of debt, the raising rates would completely collapse the economy. The federal government paid $26 billion in interest on the debt in May alone. That’s with rates effectively at zero.
It’s hard to even fathom this level of debt. And nobody seems concerned. Virtually everybody agrees that trillions in government spending is “necessary” to boost the economy through the COVID-19 government shutdown – Republicans and conservatives included. Everybody is a Keynesian now.
But nobody seems to be asking the most significant question: who is going to pay for all of this? After all, borrowed money has to be paid back.
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