The U.S. Treasury collected $3.42 trillion in revenue during the fiscal year ended 30 September, but spent $6.55 trillion, leaving a deficit of $3.13 trillion, or 15.2 percent of GDP, according to a 6 September estimate by the Congressional Budget Office.
The new deficit is three times greater than the previous year.
If the estimate proves correct, the total U.S. debt will exceed the size of the national economy: the country will owe 101 percent of GDP, according to the private, nonprofit Committee for a Responsible Federal Budget (CRFB), the most lopsided ratio since 1946, when the U.S. debt reached 106.1 percent of GDP, thanks to World War II.
The debt spike resulted from the $4-trillion economic rescue plan enacted by Congress and the U.S. Federal Reserve to bail out the economy after states shut it down in response to the COVID pandemic.
As COVID resurges across the country and new shutdowns are imposed, federal officials are negotiating another stimulus round, with possible totals ranging from $1 trillion to $2.4 trillion in borrowed money.
No matter the final figure, spending will continue to rise, outpacing revenue and requiring a greater share of present and future federal income to be devoted to interest and principal payments on the ballooning debt.
“Debt is the size of the economy today and soon it will be larger than any time in history,” said Maya MacGuineas, CRFB president.
The larger the debt, the fewer resources the federal government will have to meet future crises, whether a pandemic, an economic depression, or a war. The rising debt also increases the risk of a new fiscal crisis or the inability to escape the current one.
“The U.S. federal budget is on an unsustainable path, has been for some time,” Federal Reserve Chairman Jerome Powell told the National Association for Business Economics’ annual meeting on 6 October.
However, with the virus not relenting and the economy still teetering, “this is not the time to give priority to” deficit reduction, he said.
TRENDPOST: Although Presstitutes keep reporting that the pandemic has caused the economic crisis, Trends Journal readers know the politicians, not the virus, ordered businesses and schools to close, ordered us to stay apart from each other, and stop living our lives until further notice.
