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.

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 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?

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?

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?