- We’re STILL running record deficits…
- The U.S. is effing around — when will it find out?…
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Dear Reader,
I learn the United States government ladled out $603 billion last month.
On guns, on butter, on bread, on circuses — and on interest.
Uncle Samuel put $74 billion into the hands of his creditors last month.
Yet his February tax haul came in at a mere $296 billion.
That is, the United States government took in under half the amount it put out last month.
Only the plague’s 2021 budget deficits gaped wider.
Yet where is the plague? Where is the economic cataclysm to justify the binge?
Neither is anywhere to be found.
Yet the United States government spends over twice what it “earns.”
What Would Jefferson Think?
Through the initial five months of fiscal year 2025 — the fiscal year commenced last Oct. 1 — the aggregate budget deficit runs to $1.15 trillion.
That is a record deficit through the initial five months of a fiscal year.
Mr. Jefferson counseled “wise and frugal government.”
Thus I hazard the old Virginian spins and spins in his cold Monticello grave.
Can anyone label the government he bequeathed us wise? Can anyone label the government he bequeathed us frugal?
Not without fighting off tears or laughter — perhaps even both.
“UNSUSTAINABLE!”
Meantime, the United States government has dedicated $480 billion to debt service these past five months.
That amount likewise registers a five-month record.
Economist E.J. Antoni in horrifying summary:
- Only 5 months into the fiscal year and we’re already over $1 trillion for the cumulative deficit –- this has never happened before and it’s going to take a herculean effort by the White House and Congress to get this under control…
- [This] is the worst start to a fiscal year EVER, with the cumulative deficit 38.5% higher than the same period in prior fiscal year — this is the mess dropped in the laps of [President Trump] and [Treasury Secretary Scott Bessent]…
- The mess left by the Biden admin and last Congress has created a deficit that’s already 63% of last year’s total deficit for all 12 months…
- UNSUSTAINABLE!
UNSUSTAINABLE, indeed, good sir.
Time for a Course Correction
Yet the unsustainable can sustain for quite a stretch.
The precise location where the transition occurs is exceedingly difficult to discern.
The only way to identify it — I hazard — is the hard way.
That is, only in retrospect… when glancing up from the bottomless abyss.
Let us then consecrate ourselves to the sustainable course — before consigning ourselves to Davy Jones’ dreaded locker.
“Why are we gambling with America’s future?,” asks New York Times columnist David Brooks.
His question is my question.
Staring at Ferguson’s Law
More from Mr. Brooks:
- Within [two] years, if interest rates remain high, payments on the debt could become the federal government’s second-largest expenditure, behind Social Security…
- Pretty soon, you’re staring at Ferguson’s Law. This is the principle enunciated by the historian Niall Ferguson that any nation that spends more on interest payments on the debt than on military spending will slip into decline.
- It happened to Hapsburg Spain, the Ottoman Empire, the British Empire and prerevolutionary France. Will it happen to us?
The answer is yes, Mr. Brooks. It will happen to us.
If it does not happen to us… it will not be due to prudence, forbearance or restraint.
It will be due to serendipity. It will be due to luck. Perhaps even divine providence.
As Germany’s iron chancellor Bismarck once noted:
“God has a special providence for fools, drunkards and the United States of America.”
Yet hope, as is said, is not a strategy.
This Isn’t Keynesianism
Mr. Brooks continues:
- Today’s high interest rate environment is already hammering, say, the housing construction industry and making housing even more unaffordable.
- The United States continues to borrow all this money even though classical Keynesian theory tells us to borrow in times of recession but commit to debt reduction in times like these, when growth is good…
Here I interject a brief aside: Mr. Brooks is correct.
Lord Keynes only counseled deficit spending in lean economic times.
Once in surplus, he believed governments should amortize the stimulative debt they sustained previously.
Thus the United States government shuns the Keynesian counsel.
Prudence Is a Boring Virtue — But Necessary
Please continue, Mr. Brooks:
- We continue to go further into debt even though the baby boom generation is aging, making programs like Social Security and Medicare more and more costly. The federal government already spends $6 on senior citizens for every $1 on children, which is not exactly investing in the future…
- It is infinitely more difficult to get bipartisan majorities to cut spending or raise taxes on the bulk of Americans than it is to get it to spend with borrowed money.
In conclusion:
- At some point all this self-confidence begins to look like hubris or a rationalization for: We want to spend the future’s money on ourselves. Prudence is a boring virtue, but the prudent course is to get the United States on a more sustainable course. As the meme artists on the internet might say (in slightly more colorful language), you mess around with debt, and sooner or later you’ll find out.
Let’s Not “Find Out”
Again, I prefer we not “find out.”
Yet I fear we will continue to “eff around.”
Effing around is the course of least resistance. And politicians will nearly always select the course of least resistance.
Truly difficult choices they do not like.
Thus I fear we will find out.
When? I simply do not know.
The answer — as always — is on the knees of the gods.
And the gods are silent.
Brian Maher
for Freedom Financial News
