Fiscal 2020 Deficit Through June

The chart below compares the U.S. fiscal 2020 deficit by month with Fiscal 2019. The federal government’s response to the COVID-19 pandemic has had a profound impact on the federal deficit.

The deficit cumulative deficit through June was in excess of $2.7 trillion, This is $2 trillion more than the cumulative deficit through June 2019. The deficit for the month of June was estimated to be $683 billion. That means the U.S. government was overspending by nearly $23 billion per day.

The spending may be fully justified in response to the global health crisis and prevent the U.S. from falling into another Great Depression. However, it remains to be seen how long the U.S. can continue to overspend by $23 billion per day without other short-term or long-term repercussions.

National Debt Exceeds $23 Trillion

Last week, the U.S. national debt crested $23 trillion. With all of the political drama surrounding the impeachment of President Trump, this milestone received scant media coverage. The lack of attention to the issue by the media doesn’t lessen the gravity of the national debt. The deficit for next year is expected to exceed $1 trillion, so the national debt will bypass $24 trillion by the end of next year.

Sadly, Congress, the President and most politicians seem to have little interest in eliminating the annual overspending and reducing the debt. It seems like the exact opposite is happening for the 2020 campaign season. Candidates are proposing more government spending, with few details of how to pay for their new plans. The result will be more deficit spending.

Are you satisfied with the way Congress, the President and our political leaders are addressing our $23 trillion debt?

Fiscal 2019 Deficit by Month

Below is a chart comparing the monthly deficit or surplus of the United States with the prior fiscal year (October 1 through September 30). During Fiscal 2019, the federal government overspent by $984 billion, which is $205 billion more than the $779 deficit for Fiscal 2018.

As a percentage, the U.S. deficit rose by a whopping 26.3%. Fiscal 2019 receipts increased by 4%, but spending increased by twice as much. You don’t have to be a financial wizard to recognize there is a problem when spending is increasing at twice the rate of revenues. This trend is not sustainable.

Does it alarm you the federal government overspent by nearly $1 trillion last year, and that spending is growing twice as fast as revenues?

Fiscal 2019 Deficit Through July

Below is a chart comparing the current year U.S. budget deficit with the prior fiscal year. Through the end of July, the federal government has overspent by $867 billion.

The current year-to-date deficit is $182 billion more than the deficit through July 2018. It’s also more than the deficit for all of Fiscal 2018 (the fiscal year ends on September 30). Based on the current spending, the annual deficit for Fiscal 2019 will exceed $1 trillion.

The last time the deficit exceeded $1 trillion, the U.S. was spending to stave off another Great Depression. At present, the economy is not in recession. Instead, the stock market is reaching all-time record levels, unemployment is at records lows and the economy is booming. Despite these prosperous times, Congress and the President continue to overspend with little regard for the future, or how the U.S. national debt is going to be repaid.

Are you concerned with a $1 trillion annual deficit in the midst of economic prosperity?

Fiscal 2019 Deficit Through June

Below is a chart comparing the monthly deficit or surplus for Fiscal 2019 in comparison with Fiscal 2018. Through the first nine months of this fiscal year, the U.S. government overspent by $746 billion, which is $139 billion more than last fiscal year.

The deficit for July was only $9 billion. This primarily due to $50 billion of July expenditures which were paid in June, since July 1 fell on a Saturday.

Government receipts were up by 3 percent for the first nine months of Fiscal 2019. However, expenditures were up by 7 percent. With this 4 percent spread, it’s easy to see why the deficit has grown by another $139 billion this year.

How sustainable do you think it is for expenditures increase by more than double the rate of revenues?

Fiscal 2019 Deficit through December

Below is a chart comparing the Fiscal 2019 deficit by month with Fiscal 2018. The cumulative deficit for the first quarter of 2019 is $317 billion, which is $92 billion more than the prior fiscal year.

Revenues for the first quarter were 1% higher than the prior year, and expenditures were 9% higher. It doesn’t take a financial genius to recognize the financial peril of expenditures growing much faster than revenues. It only works because the U.S. government continues to borrow money to sustain the spending. The U.S. will borrow nearly $1 trillion this year alone to maintain its rate of expenditures, and by the end of the fiscal year, the total U.S. debt will exceed $22 trillion.

What do you think about government revenues growing at 1%, while expenditures are growing by 9%?

Fiscal 2019 Deficit Through November

The chart below compares the U.S. deficit by month with the prior fiscal year. In the first two months of the year, the U.S. has overspent by $303 billion, which is $101 billion more than last year.

Since December 1, 2018 fell on a Saturday, certain payments that would have been made in December were accelerated into November. Subtracting the timing of those payments, the deficit would have been $229 billion. Considering there were 61 days in October and November, the U.S. government spent $3.75 billion more each day than it received. With a projected deficit of nearly $1 trillion this year, the overspending will decrease to an average of $2.75 billion per day.

How long do you think the U.S can continue overspending nearly $3 billion each day?

Fiscal 2019 Deficit Through October

The U.S. government started a new fiscal year on October 1, 2018, which will end on September 30, 2019. The federal government overspent by $98 billion in October. The chart below compares the monthly deficit or surplus for the current fiscal year with Fiscal 2018.

Congress has yet to agree on a budget for Fiscal 2019, nor have they passed all of the required spending bills. To keep the government operating until after the November election, Congress passed a Continuing Resolution (CR), which temporarily funded the government until December. The CR effectively puts the government on autopilot until Congress can pass the necessary fiscal legislation.

The preliminary estimate is the U.S. government will overspend by nearly $1 trillion this year. The deficit may be higher or lower, depending upon the final agreement reached by Congress and the President. Since fiscal issues were not a major campaign issue during the 2018 election cycle, don’t expect Congress to make any significant changes that will reduce the deficit.

How concerned are you that the U.S. government will overspend by nearly $1 trillion this year?

Impact of the 2018 Midterm Election

The 2018 midterm election is nearly over. Most of the national attention is focused on the control of Congress. Can the Democrats wrest control of the House and/or Senate from Republicans, or will the GOP retain control of either Chamber?

From a fiscal policy standpoint, it may not matter what happens. That is a rather dour assessment, but it’s true. If you look at the annual budget deficits since 2000, it doesn’t seem to matter much which party controls Congress or the White House. There have been all variations of party control over the past 18 years, and the result is the same… annual deficits ranging from $140 billion to $1.4 trillion. Although both parties may talk about balancing the budget and reducing the debt, neither have taken any serious action over the past two decades to do anything about it. Instead, they have more than doubled the national debt in less than a decade.

Since balancing the budget and reducing the $21 trillion national debt are largely absent from the political discourse in the midterm elections, don’t expect whoever is elected to suddenly pay attention to them. Balancing the budget and reducing the debt is going to require difficult decisions, which may be politically unpopular. As a result, few politicians will tackle these issues. It’s far easier to promise constituents something more (either more spending or less taxes), than take a controversial stance that may anger certain voters.

It’s a rather pessimistic view, but probably realistic to think little will be done over the next two years to change our nation’s fiscal policies no matter who wins on Tuesday. The 2018 midterm election may be impact a lot of other issues, but it isn’t likely to change the financial position of the U.S. government.

Fiscal 2018 Deficit by Month

The graph below charts the monthly budget deficit or surplus of the U.S. government for the fiscal year ending September 30, 2018. The cumulative deficit for Fiscal 2018 was $782 billion, which was slightly less than initially projected.

Because of the timing for month-end payments, approximately $55 billion of expenditures that normally would have been paid in September, were paid in August. This timing difference caused the August deficit and September surplus to be much larger than normal.

As depicted in the graph, the government spent more than it receives nine months out of the year. The surpluses in January, April and September correspond with the timing of when estimated tax payments are due. However, the excess in these three months was not large enough to pay for the other nine months of overspending.

What do you think of a budget that overspends nine out of twelves months?

Fiscal 2018 Deficit Through July

The chart below compares the monthly deficit or surplus for the current fiscal year with Fiscal 2017. The U.S. government posted a $74 billion deficit in July, which is $31 billion more than July 2017.

The cumulative deficit through July 2018 is $682 billion; $118 billion more than the $564 billion deficit through July 2017. Based on current projections, the federal government will overspend another $111 billion over the next two months pushing the Fiscal 2018 deficit to $793 billion. 

Congress is currently working on the Fiscal 2019 budget and spending bills. Absent any significant changes, which is unlikely with the mid-term 2018 elections a few weeks away, the federal government will spend $1 trillion more than it collects during Fiscal 2019. 

Even though the U.S. is on the verge of indefinite trillion budget deficits, why do you think fiscal matters are barely mentioned during this election cycle?

Fiscal 2018 Deficit Through June

The chart below compares the U.S. government monthly deficit for Fiscal 2018 with 2017. Nine months into the current fiscal year, which ends September 30, 2018, the government has overspent by $607 billion. The government expects to overspend by another $186 billion over the next three months.

At this rate, the government is overspending by an average of $66 billion every month. A couple of decades ago, the U.S. government overspent by less than $66 billion each year, and back then, key Congressional leaders were pushing hard to reign in federal spending. Today, Congress will spend another $50-100 billion without even blinking an eye.

Why do you think our attitude towards spending billions more than the government collects each year has changed over the past few decades?

Fiscal 2018 Deficit Through May

The chart below compares the monthly U.S. deficit for Fiscal 2018 with Fiscal 2017. Through the end of May, the current year deficit is $530 billion, which is nearly $100 billion more than last year. Given the overspending to date, the federal government will likely spend approximately $800 billion more than it collects this year.

One of President Trump's economic advisers recently claimed the deficit was declining. This simply is not true. The Fiscal 2018 deficit is projected to be $125-150 billion more than last year's deficit of $666 billion. Since the federal government has overspent by nearly $530 billion over the past 8 months,  there is no way the current deficit will be less than last year.

Do you think anyone believes the current deficit will be less than last year?

Fiscal 2018 Deficit Through April

The graph below illustrates the monthly deficit or surplus for Fiscal 2018. 

The cumulative deficit through the end of April is $382 billion, which is $39 billion more than last fiscal year. The large surplus in April is primarily due to the payment of individual taxes that were due April 15th. Based on current projections, the federal government won't have another surplus month this fiscal year and the deficit will more than double over the next five months.

What are your thoughts about the Fiscal 2018 deficit?

The Cost of Higher Interest Rates

The amount of interest paid by the U.S. government is one of the fastest growing expenditures of the federal government. With a national debt in excess of $21 trillion, small increases in the interest rate results in the government paying billions of dollars in additional interest.

Interest rates have been at historic lows for nearly a decade, but rates are starting to rise. This is good news for investors, but bad news for the federal government. With a $21 trillion debt, a 1% rise in the interest rate will cost the U.S. government $210 billion of additional interest. As illustrated in the chart below, that is more than the federal government spent on eight Departments last year.

This additional interest cost will add to the annual overspending and make it more difficult to balance the budget. It will also exacerbate the budget battles in Congress.

Fiscal 2018 Deficit Through February

Below is a graph tracking the deficit of the U.S. government by month, in comparison to the prior fiscal year. Through February 28, 2018 (five months into the current fiscal year), the federal government has overspent by $392 billion.

See the big blue line for February? That shows the federal government overspent by approximately $216 billion; just in February. Considering there are only 28 days in February, our government overspent by nearly $8 billion each day.

Any rational person would have to admit this is unsustainable, yet Congress seems to have little time, attention or political willpower to anything about it.

What do you think about the current spending pattern of the U.S. government?

Fiscal 2018 Deficit through December

Below is a graph comparing the monthly deficit for Fiscal 2018 with Fiscal 2017.

The preliminary December deficit was $26 billion, which is $1 billion less than December 2017. The cumulative deficit for the first three months is $20 billion more than the prior year. Revenues for the first quarter have risen by 4%, but expenditures have risen by 5%. 

Since Congress has yet to finalize the spending for Fiscal 2018. The final appropriations bills could reduce spending and shrink the projected deficit, or they could increase spending and enlarge the deficit.

Do you expect the current year deficit will be larger or smaller than last year?

A New Year - A New Budget

If you're like a lot of people, you create a budget at the beginning of the new year. Budgets are a great way to manage your finances. Putting your income and expenses down on paper can help you better understand how much margin you have in your spending, or if it looks like you're going to come up short. Budgets may not account for every expense or event that may happen, but they are effective financial tools to help you understand your financial obligations, establish priorities and manage your cash flow.

The U.S. government also has an annual budget. However, its fiscal year starts on October 1 rather than January 1. The budget resolution is passed by Congress but doesn't require the signature of the President. The federal budget establishes the guidelines, and the specific spending is determined by separate appropriations bills. 

Although Congress has a budget and spending process, it rarely follows it anymore. Congress didn't pass the Fiscal 2018 budget until November, and none of the appropriations bill have been passed, even though we're more than three months into the current fiscal year. Congress has passed short-term continuing resolutions to keep the U.S. government from shutting down. 

Budgets can be useful financial tools, if used effectively. Individually, budgets should be more than an exercise you conduct at the beginning of the year. You should periodically review and update your budget to check your progress. For the federal government, it should pass a budget and the related appropriations bills before the start of the fiscal year, rather than after several months have passed.

How effective would you rate the federal government's budget process?

U.S. Budget Deficit through November

Below is a graph tracking the monthly federal deficit for Fiscal 2018, which runs from October 2017 through September 2018.

The federal government overspent by $198 billion in October and November. This compares to the $181 billion deficit through November 2017. Revenues and expenditures both grew at 6% over last year. Since annual expenditures exceed revenues by $600 billion, the cumulative deficit is greater than last year.

Congress has yet to pass the required appropriations for Fiscal 2018, and current spending is determined by temporary funding measures. The current shot-term Continuing Resolution ends January 19, 2018.

Do you think the spending measures approved by Congress will increase or decrease the budget deficit for this year?

The Fiscal 2017 Deficit

The U.S. government's fiscal year ended on September 30, and a new year began on October 1. The Congressional Budget Office (CBO) estimates the Fiscal 2017 deficit was $668 billion, which is $81 billion more than Fiscal 2016. A year ago, the CBO was projecting the Fiscal 2017 deficit would be less than Fiscal 2016, not $81 billion more. The chart below compares the monthly deficit or surplus to the prior year.

Total government revenues increased by 1%, but expenditures increased by nearly 3%. As a percentage of Gross Domestic Product (GDP), the Fiscal 2017 deficit was approximately 3.5% of GDP, up from 3.2% in Fiscal 2016. It's also the second consecutive year the deficit rose as a percentage of GDP, which indicates government spending is growing faster than the U.S. economy.

We're already two weeks into the new fiscal year, and Congress is still a long ways from deciding on government spending for the coming year. To prevent a government shutdown, Congress approved a Continuing Resolution, that effectively continues all Fiscal 2017 spending until mid-December. Since it's unlikely Congress will enact the necessary monetary legislation until close to the deadline, spending for nearly one-fourth of the year will be equal to or greater than last year. Unless Congress enacts spending cuts (which it has been unable to do so far), they have created a situation where the Fiscal 2018 deficit will likely be higher than the most recent $668 billion deficit.

Are you concerned the federal government spent $668 billion more than it received during the last year?