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.

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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?

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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?

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Fiscal 2019 Deficit Through May

The chart below compares the U.S. government’s monthly deficit or surplus for Fiscal Year 2019 with Fiscal Year 2018. Through the end of May, which is seven months into the fiscal year, the U.S. government has overspent by $738 billion.

To make a fair comparison, the May deficit is $50 billion higher, because of June payments made in May. Since June 1 was on Saturday, certain expenditures were paid in May instead of June. If you subtract out this extra $50 billion the deficit was still $688 billion, which is still $155 billion more than the prior seven month period. The CBO still estimates the Fiscal 2019 deficit will be less than $1 trillion, but it wouldn’t take much disruption, either from an economic slowdown or unexpected expenditures, to push beyond the $1 trillion mark.

Excluding the $50 billion timing, the U.S. government is overspending in excess of $22 billion per month. How does that affect you?

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Fiscal 2019 Deficit Through April

The chart below tracks the monthly deficit or surplus of the U.S. government for the current fiscal year, in comparison to the prior year. The deficit through April (the first seven month of the fiscal year) was $531 billion. This is $145 billion more than the first seven months of Fiscal 2018.

According to a recent CBO projection, the U.S. deficit will be near $900 billion by September 30. This is expected to be $100 billion more than the Fiscal 2018 deficit, but less than the initial estimate of $1 trillion. In order to meet this projection, the deficit for the next five months will need to be nearly the same as May through September of 2018.

How likely do you think the federal deficit for the next five months will be equal to the deficit for the same period last year?

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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.

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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

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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?

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Fiscal 2018 Deficit through August

The chart below compares the monthly deficit for Fiscal 2018 with Fiscal 2017. The cumulative deficit for the first 11 months of the year is $895 billion.

The federal government recorded a whopping $210 billion deficit for August. Since September 1 occurred on Saturday, the government paid approximately $55 billion of expenditures in August which normally would have been paid in September. Excluding this timing difference, the U.S. still would have overspent by $155 billion.

The acceleration of the $55 billion payments into August and the September tax collections will likely result in a monthly surplus for September. However, the U.S. government will overspend in excess of $800 billion this year.

Are you concerned the federal government will record a deficit in excess of $800 billion this year?

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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?

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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?

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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.

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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.

Broken Process = Bad Results

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If you’re concerned about the continued rise in the federal debt, you’re probably not very pleased with the spending bill that recently passed Congress. The $1.3 trillion spending plan, only covers about 25% of total federal spending. The U.S. government spends another $3 trillion for what is classified as mandatory spending (e.g. Social Security, Medicare, Medicaid, interest on the debt). 

Although there are a lot of aspects to increased spending, the process is a contributing factor. As one Representative opined, “Nothing good comes from legislation passed at the deadline.” Members of Congress know that last-minute, must-pass legislation is an opportunity for a lot of pork-barrel spending.

Congress has a budget and spending process but hasn’t followed it for years. The process begins with a proposed budget by the President in February. Congress then passes it’s own Budget Resolution by May, followed by 12 different Appropriations (spending) bills, that can be enacted before the beginning of the fiscal year on October 1.

For the current fiscal year, Congress didn’t pass its Budget Resolution until November and just passed the spending bill in March; nearly 6 months after the fiscal started. Instead of passing 12 different spending bills, everything was rolled into one massive 2,200+ page bill, that was passed within 24 hours of being written. 

Following the process doesn’t guarantee a balanced budget or reduced spending. However, Congress’ failure  to follow its budget process is helping to drive increased federal spending.

Do you agree the broken process is leading to bad fiscal results?

Fiscal 2018 Deficit through March

The chart below compares the monthly deficit of Fiscal 2018 with Fiscal 2017. Through the first six months of the fiscal year, the federal government has overspent by $598 billion, which is $73 billion more than the prior year. As a percentage, the deficit is nearly 14% greater than one year ago.

The rate of growth in federal revenues has slowed since the beginning of January. Since most of the tax law changes became effective on January 1, this is not a complete shock, especially since the CBO projected the federal government would collect $1 trillion less over the next decade. Add in the additional spending approved through the Fiscal 2018 Omnibus appropriations bill, and the deficit will continue to increase throughout the rest of the fiscal year.

What do you think of the current increase of the federal deficit?

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Fiscal 2018 Deficit through January

Below is a graph comparing the monthly federal deficit for Fiscal 2018 in comparison to Fiscal 2017.

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The deficit for the first four months of the fiscal year was $174 billion. This is $17 billion higher than the deficit for the first four months of 2017. January's surplus is primarily driven by individuals who pay their last installment of 2017 estimated taxes in early January.

Starting January 1, 2018, the U.S. Treasury expects to receive less tax revenue as a result of the tax reform legislation passed in December 2017. To avoid a government shutdown last in early February, Congress also agreed increase defense and discretionary domestic spending. Therefore, you can expect to see a the deficit each month continue to exceed the prior year, for the rest of Fiscal 2018.

Are you concerned with a rising federal deficit?

President Trump's Fiscal 2019 Budget

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President Trump released his Fiscal 2019 Budget plan this past week. It's rare for Congress to adopt a President's budget. However, it's the first step in the budgetary process, and it outlines the President's plans and priorities.

Below are some highlights of President Trump's plan.

  • Total Fiscal 2019 spending is projected to be $4.4 trillion, with $716 billion allocated for defense and $18 billion to build a wall along the southern border.
  • Additional $200 billion of spending for infrastructure, which was part of the President's $1.5 trillion infrastructure plan.
  • U.S. Gross Domestic Product (GDP) is projected to grow by 3% annually.
  • The Fiscal 2019 and 2020 deficits will be approximately $1 trillion each year before slowly decreasing.
  • The plan doesn't project a balanced budget within the next 10 years, and the deficit at the end of the decade is expected to be $450 billion.
  • The U.S. will overspend in excess of $7 trillion over the next decade, pushing the national debt to nearly $28 trillion.
  • The President wants to reduce domestic spending by more than $3 trillion over the decade, despite the agreement by Congress last week to increase domestic spending by $300 billion.

If you recall, President Trump campaigned on balancing the budget and addressing the $20 trillion national debt. Even though his budget isn't likely to become law, it demonstrates the difficulty our leaders face in trying to reduce federal spending and balance the budget. They may have good intentions, but the harsh realities of the difficult choices required and the potential political backlash make it near impossible to achieve.

This is just the first step in the budgetary process, but if the President, who campaigned on fiscal restraint, doesn't propose a balanced budget, don't expect Congress to pass one on their own.

Fiscal 2018 Deficit through December

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

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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

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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.

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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 Deficit for Fiscal 2017

The Congressional Budget Office (CBO) has finished accounting for the country's finances for Fiscal Year 2017, which ended September 30, 2017. The deficit for the year was $666 billion, and the chart below shows the budget surplus or deficit by month. 

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The following are a few highlights.
▪️The deficit was $80 billion more than Fiscal 2016.
▪️Since the CBO initially projected the deficit would be less than 2016, the federal government spent over $100 billion more than initially planned.
▪️Revenues were $3.3 trillion: 1% more than Fiscal 2016.
▪️Expenditures were $4.0 trillion: 3% more than Fiscal 2016.

What do you think about the country's financial results for the past year?