Congress โsolvedโ the debt ceiling problem byย effectively eliminating borrowing limits for the next two years. But it did nothing to address the underlying problem. And that underlying problem is painfully obvious when you look at the monthly budget deficits the federal government continues to run month after month.
In May, the federal government piled another $240.3 billion onto the fiscal 2023 deficit, running it to $1.38 trillion with four months left to go, according to the latest Monthly Treasury Statement.
It was the fourth-highest monthly deficit of fiscal 2023.
The feds face a double-whammy of falling revenue and rising spending.
While the U.S. Treasury reported a budget surplus in April with an influx of tax payments, there were ominous signs. Compared to April 2022, tax receipts were down 26.1 percent. That plunge in revenue pushed the April budget surplus down by 43 percent compared to last yearโs.
This reflects the fact that federal revenues are generally falling. In May, the Treasury reported receipts of $307.5 billion. That was a 26.5 percent drop from May 2022.
This wasnโt unexpected.
Last year, strong tax receipts helped to paper over the spending problem. The federal governmentย enjoyed a revenue windfall in fiscal 2022. According to aย Tax Foundation analysis of Congressional Budget Office (CBO) data, federal tax collections were up 21 percent. Tax collections also came in at a multi-decade high of 19.6% as a share of GDP. But CBO analysts warned it wonโt last. And government tax revenue will decline even faster if the economy spins intoย a recession.
But the root of the problem is on the spending side of the ledger. To say the federal government is spending like a drunken sailor would insult drunken sailors.
In May, the minions in D.C. blew through another $547.8 billion. That was a 20.3 percent increase over May 2022.
Now, you might be thinking that with the spending cuts in theย Fiscal Responsibility Act, Congress fixed this problem. But we live in an upside-down world where spending cuts mean spending still increases.
In other words, the spending cuts will not put a dent in current spending. That means we can expect these massive deficits to continue month after month. And itโs only a matter of time before Congress, the Biden administration, or whoever ends up in the White House next abandons the pretense of spending cuts to address the next “crisis.”
Keep in mind, the feds now have a credit card with no limit.
The fundamental issue wasnโt that the U.S. government couldnโt borrow enough money. The fundamental problem was, and still is, that the U.S. government spendsย too much money. Despite the pretend spending cuts, the debt ceiling deal didnโt address that problem. Even with the new plan in place,ย spending will go up. And itโs already historically high. That means big budget deficits will continue and the national debt will mount.
The national debt surged by over $350 billionย on the first business day after the debt ceiling deal. In October,ย the national debt blew past $31 trillion. Itย now stands at $31.92 trillion.
Meanwhile, according toย the National Debt Clock, the debt-to-GDP ratio stands at 120.7 percent. 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 percent retards economic growth by about 30 percent. This throws cold water on the conventional โspend now, worry about the debt laterโ mantra, along with the frequent claim that โwe can grow ourselves out of the debtโ now popular on both sides of the aisle in D.C.
To put the debt into perspective, every American citizen would have to write a check for $95,272 in order to pay off the national debt.
This is an unsustainable trajectory, especially in a high-interest rate environment.
According to anย analysis by theย New York Times, net interest costs rose by 41 percent last year. According to the Peterson Foundation, the jump in interest expense was larger than the biggest increase in interest costs in any single fiscal year, dating back to 1962.
The cost of financing the debt will almost certainly rise even more now that Congress has done away with the debt ceiling for two years.
As the Treasury floods the market with new debt, bond prices will likely fall in order to create enough demand for all of those Treasuries. Bond yields are inversely correlated with bond prices, and as prices fall, interest rates rise.
A Bank of America note projects that the anticipated post-debt ceiling bond sale would have an impact equivalent to another 25 basis point Federal Reserve rate hike.
If interest rates remain elevated or continue rising, interest expenses could climb rapidly into the top three federal expenses. (You can read a more in-depth analysis of the national debtย HERE.)
The soaring national debt and the U.S. governmentโs spending addiction are big problems for the Federal Reserve as it battles price inflation. As youโve already seen, the push to raise interest rates is putting a strain on Uncle Samโs borrowing costs. But there is an even bigger problem. The Fed canโt slay monetary inflation โ the cause of price inflation โ with rate cuts alone. The US government also needs to cut spending.
Thatโs not happening, despite Republican Party talking points.
Something has to give. The Fed canโt simultaneously fight inflation and prop up Uncle Samโs spending spree. Either the government will have to cut spending in real life, or the Fed will eventually have to go back to creating money out of thin air in order to monetize the debt.
Itโs pretty clear where weโre heading.
- Usurpation: Weapon to Destroy Freedom - January 25, 2026
- Parchment barriers don’t stop tyranny - January 6, 2026
- Living Under the Consolidation the Founders Warned About - December 19, 2025