As federal budget projections unveil a distressing trend, $1 trillion+ US budget deficits are solidifying their status as the new normal, stretching through 2033 and beyond. The grim reality suggests that witnessing a year with a deficit below $1 trillion may be an elusive prospect.
In a disconcerting revelation, the US Treasury anticipates borrowing an additional $816 billion in Q1 2024 alone, with a significant portion allocated to deficit spending. The trajectory of deficit spending, as predicted by the Council on Foreign Relations, has propelled the US to allocate more funds to gross interest payments than to defense, painting a concerning fiscal picture.
The escalating deficit, coupled with surging interest rates, intensifies the precarious situation. The US, burdened with a staggering $33.8 trillion debt, faces a potential disaster if additional debt is accrued to counter the rising deficit. Skyrocketing interest rates, especially when considering the current yield on 10-year UST bonds at 4.27%, could lead to an unsustainable expense of $1.44 trillion, a stark 50% increase compared to the pinnacle of this chart.
As the specter of mounting debt and unbridled deficit spending looms, the need for strategic fiscal measures becomes imperative to avert potential economic turmoil. The rising tide of $1 trillion+ US budget deficits demands urgent attention and prudent financial management to navigate these perilous financial waters.
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As the Council on Foreign Relations predicted, the US is now spending more on gross interest than on defense.
Adding even more debt to counter the rising deficit would be disastrous and unsustainable. pic.twitter.com/Vp6I25BJfz
— Phoenix Capital (@PhoenixCapitalH) December 11, 2023
Deficit spending is out of control. Skyrocketing interest makes the situation worse. With $33.8 trillion debt outstanding, if US refinanced at current yield on 10-year UST bond (4.27%), expense would be $1.44 trillion, 50% higher than top of this chart. t.co/MLnYFsU229
— David Sommers (@dgsommersmkts) December 11, 2023