This week featured lots of angst-ridden headlines about the annual budget deficit for the 2019 fiscal year (which ended on September 30) jumping to $984 billion, an increase of more than $200 billion.
For reasons I’ve previously outlined, I don’t lose too much sleep about the level of government borrowing. What’s far more important is the burden of government spending.
Whether the budget is financed by taxes or borrowing, the level of spending is what really matters. Simply stated, that number measures the amount of money that politicians divert from the economy’s productive sector.
That being said, it’s sometimes very illuminating to look at why red ink goes up and down.
So I went to the Treasury Department’s most-recent Monthly Treasury Statement and looked at the raw numbers. What did I find?
Lo and behold, the deficit jumped to $984 billion because outlays are increasing twice as fast as revenue.
Perhaps even more discouraging, the burden of spending is rising more than four times faster than needed to keep pace with inflation.
These are very discouraging numbers, especially when you keep in mind that this is the calm before the storm. Because of poorly designed entitlement programs and an ageing population, our fiscal situation will deteriorate even faster in the future.
Unless there’s much-needed reform.
But I’m not holding out much hope. Trump is a big spender and Congress is filled with big spenders.
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Image credit: Andy Withers | CC BY-NC-ND 2.0.
