With a surge in tax revenue in April, the federal government posted a record budget surplus last month. This seems like good news. And the mainstream has turned it as such. But record government revenues mask a spending problem that is not going away.
The surplus in April was $308.2 billion. That reduced the fiscal year’s budget deficit to $360 billion with five months ahead.
Record tax receipts of $863.6 billion were paid into the Treasury in April, with the deadline for filing returns falling within the month. By comparison, government revenue in March totaled $315.2 billion. December was the second-highest revenue month in fiscal 2022 with revenue totaling $486.7 billion.
In other words, April’s record inflows into the Treasury were an anomaly that is unlikely to happen again.
By contrast, government spending remained remarkably constant throughout the year. Uncle Sam spends about half a trillion dollars every month. In fact, the federal government spent more money in April than any previous month this fiscal year – $555.4 billion. That brings total spending this year to $3.35 trillion.
The mainstream keeps telling us that spending is shrinking with the end of many pandemic-era programs. It’s true. Stimulus and other programs have caused spending to explode over the past two years. But if you cut pandemic programs and look at core spending, it’s clear the federal government is far from getting its spending problem under control.
Meanwhile, President Joe Biden wants to keep spending, and he wants to spend more. His budget increases spending on everything from national programs to the Pentagon.
Ultimately, the Treasury cannot rely on record revenues every month to drive down the deficit. Next month, tax revenues will almost certainly return closer to the annual average of around $300 billion. This means you can expect a return to big deficits.
Mainstream pundits have breathlessly reported that the 2022 deficit could be less than $1 trillion. It sounds like a great achievement until you put the numbers into context. Before the pandemic, the U.S. government had only run deficits over $1 trillion on four occasions, all following the 2008 financial crisis. Trump nearly hit the $1 trillion mark. dollars in 2019 and was on course to run a $1 trillion deficit before the pandemic. The economic disaster caused by the government’s response to COVID-19 has given policymakers an excuse to spend without question. Now it looks like the government is settling back into the status quo – running deficits every year akin to the 2008 financial crisis.
And if the economy slips into a recession as the Fed tightens monetary policy to fight runaway inflation, you can expect incomes to fall, which means even bigger budget deficits.
Simply put, the April Treasury report does not signal the end of borrowing and spending. It’s not “problem solved”. It’s just “an overlooked issue”.
The national debt currently stands at $30.38 trillion. That’s about $10 billion more than this time last month, even with the big surplus.
According to the National Debt Clock, the debt to GDP ratio is 128.99%. Despite the lack of mainstream interest, debt has consequences. More public debt means less economic growth. Studies have shown that a debt-to-GDP ratio above 90% retards economic growth by about 30%. This throws cold water on the conventional “spend now, worry about debt later” mantra, as well as the frequent assertion that “we can get out of debt” now popular on both sides of the world. went to DC.
To put the debt into perspective, every American citizen would have to write a check for $91,470 to pay off the national debt.
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