By Brian Maher
This post Trillion-Dollar Deficits Far as the Eye Can See appeared first on Daily Reckoning.
We have spotted a raven of foreboding… a portent of evil to come…
Interest on the public debt struck $28.43 billion last month.
That is the highest figure for any February on record.
For the first five months of this fiscal year (Oct.–Feb.), interest on the public debt has risen 8% over the same period last year.
At $203.23 billion… that too is a record.
Justice requires us to remind that the United States Treasury often goes the month of February on a lean purse…
It is tax season… and tax returns deplete its coffers.
But this February emptied its change much more than the custom.
So the specter of trillion-dollar deficits once again appears…
“February Budget Deficit Surges as Interest on U.S. Debt Hits All Time High,” affirms Zero Hedge.
“U.S. February Budget Report Shows First Sign of Wider Deficits to Come,” warns MarketWatch.
Why the surging deficits — why now?
The answer arrives in two parts:
The Trump tax cuts… and higher government spending.
Zero Hedge:
According to the Congressional Budget Office, receipts declined by 9.4% from last year as tax refunds rose and the new withholding tables went into effect… Outlays meanwhile rose by 2% due to higher Social Security and [as] Medicare benefits rose and additional funds were released for disaster relief.
The pace should only quicken as the tax cuts take full effect and last month’s budget deal balloons spending over the next two years.
We’re heart and soul for tax cuts.
But not for higher deficits.
There is something within the liver and lights that demands a square accounting…
Spend more if you must, it whispers — but pay your way as you go.
Paying bills with borrowed money is the way of the scoundrel… the profligate… the bankrupt.
In 1970 — the year before Nixon cut the dollar’s final tether to gold — public debt totaled $275 billion.
Or in today’s dollars, $1.2 trillion.
And today?
U.S. public debt nears $21 trillion… and swells by the day.
Perhaps you wonder why.
“Some circumstantial evidence is very strong, as when you find a trout in the milk,” said Thoreau.
The trout turned up in the milk in 1971:
Now turn your attention to the parabolic rise in debt after the financial crisis of 2008.
Surely the interest on this debt has swamped the Treasury.
Ah, but with its massive bond purchases post-crisis, the Federal Reserve hammered interest rates to zero.
So interest payments on the debt have steadied since the financial crisis began — even though total debt now scrapes the sky.
In fact, interest payments on the debt were higher in the mid-1990s than last year.
But the days of wine and roses, of nearly cost-free borrowing… are over.
Marc Faber of the eternally sunny Gloom Boom & Doom Report:
Years of near-zero interest rates… allowed governments and households to borrow money for almost nothing. But that’s changing… [and] this is where things get scary…
Since the Federal Reserve began raising interest rates in Q4 2015, interest payments on the United States national debt have soared 38%. …read more
Source:: Daily Reckoning feed
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