The April federal budget deficit came in at a staggering $738 billion as government coronavirus stimulus began flowing through the pipelines and revenue dipped due to the government lockdowns.
Analysts expected a massive deficit in April, but it’s still a staggering number. To put it into perspective, the previous record for a single month was $235 billion and that was just in February of this year.
Including April’s shortfall, the budget deficit for fiscal 2020 stands just under $1.5 trillion with five months to go.
The highest deficit on record was $1.413 trillion in 2009. In fact, the federal government has only run deficits over $1 trillion in four fiscal years, all during the Great Recession. The fifth trillion-dollar deficit was coming down the pike in fiscal 2020, despite what Trump kept calling “the greatest economy in the history of America.”
Simply put, the Trump administration was already running significant budget deficits even before the coronavirus crisis and debt was piling up at a dizzying pace. The deficit already featured numbers you would expect to see during a massive economic slowdown. Response to the pandemic has put spending and debt in hyperdrive. The national debt eclipsed $24 trillion just last month. Twenty-eight days later, it pushed past $25 trillion.
The U.S. Treasury Department announced plans to borrow $2.99 trillion in the second quarter. The Treasury also plans to borrow another $677 billion in the July-September quarter, bringing the total fiscal 2020 budget deficit to a projected $4.48 trillion. Given those numbers, the national debt will end fiscal 2020 over $28 trillion.
President Trump said he plans to address the national debt if reelected. He didn’t present any kind of plan, but he did say that the growing debt “bothers” him. It appears the plan is just to kick the can down the road by issuing longer-term Treasuries at zero percent interest.
“We’re putting in, we’re replacing debt with really long term good debt, zero, you know, which is a beautiful thing,” Trump said in a radio interview.
But who the heck is going to buy long-term bonds with no yield?
And refinancing doesn’t address the underlying issue. Uncle Sam has a spending problem. And the truth he had a spending problem long before the pandemic. That previous budget deficit record last February came before the economic lockdown for COVID-19.
The Trump administration spent $980 billion in April alone, a 161 percent increase. That pushed total spending for the fiscal year to $3.33 trillion.
The federal government has already committed to roughly $3 trillion in stimulus and more is certainly coming down the pike. The Democrats in the House recently proposed another $3 trillion spending bill.
The revenue side of the equation looks equally gloomy. Receipts for the month came in at $242 billion, down about 55 percent year-on-year. According to a Treasury Department official cited by Reuters, $600 billion in outlays for April were attributable to government spending on coronavirus relief measures. Government receipts fell by about $300 billion due to the economic lockdown.
The trillion-dollar question is who’s going to pay for all of this.
The answer is simple: we are!
We will either see higher taxes or the government will try to inflate the debt away by printing money and further devaluing your purchasing power.
I’d expect both.
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