Shrinking Deficit? Ha! US Government Debt Jumps by $1.1 Trillion in Fiscal Year

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Ballooning US Gross National Debt in Fiscal 2014

When it comes to the Federal deficit, reliable numbers are as elusive as unicorns. Not that there aren’t plenty of numbers out there, but they don’t match reality. And reality is ultimately the change in the gross national debt which shows in its unvarnished manner just how much money the federal government actually had to borrow to fill the fiscal holes.

Regardless of what has been proffered by the White House, the Congressional Budget Office, and others, the total gross national debt outstanding of the US of A hit $17.824 trillion in fiscal 2014 ended September 30. A jump for the fiscal year of $1.086 trillion.

It could have been worse: note how it jumped on October 1, the first day of fiscal 2015, by another $51 billion. That’s certainly one elegant way of putting some lipstick on the debt in fiscal 2014 – by kicking part of it into the next fiscal year. But hey, we all do that. From the Treasury Department:

US-gross-national-debt-jumps-51billion-1st-day-fiscal-2015

The fact that the total debt taxpayers will have to deal with in the future soared by $1.1 trillion in fiscal 2014 is in part due to last year’s debt ceiling charade in Congress.

Starting in March 2013, when Treasury debt outstanding hit the debt ceiling, the Treasury Department couldn’t sell additional debt to bring in the money that the government continued to spend. So it borrowed that money via “extraordinary measures” from other accounts, to be repaid later. Then on October 16 last year, so in fiscal 2014, President Obama signed a deal into law that avoided default. The next day, the gross national debt jumped $328 billion to $17.075 trillion.

Most of the $328 billion should have fallen into fiscal 2013. If subtracted from the $1.086 trillion by which the debt ballooned in fiscal 2014, it reduces the increase in the debt to $758 billion.

The chart below summarizes the glorious fiscal condition of the US over the years. Note the exponential increase since 2001, after four fiscal years of so-called “surpluses.” In quotes because these “surpluses” between 1998 and 2001 that at one point exceeded 2% of GDP should have brought down the gross national debt by the amounts of the surpluses. But not these “surpluses!” The debt increased in every one of those four years, in total by $394 billion. That’s how much real money it took to cover these government accounting “surpluses.”

Since 2002, the US government borrowed $12 trillion, or two-thirds of the total debt outstanding! Since 2008, the government borrowed $8.8 trillion, or about half of the total debt outstanding, at an average rate of $1.26 trillion per year. Come to think of it, not all that much as changed in fiscal 2014.

US-Gross-National-Debt-1972-2014

The Fed has been the enabler. After years of QE, it currently owns $2.45 trillion or 14% of the gross national debt, in addition to a couple of trillion in other securities. The Fed’s asset purchase binge with newly printed money allowed the US government to go on a borrowing spree and blow this money. There have been some big beneficiaries: Wall Street, the corporate elite, Warren Buffett in particular through the bailout of this financial and insurance empire, the military and intelligence complex, and others. And there have been millions of small beneficiaries: people receiving federal subsidies of some sort. But for the economy, which is going to have to pay for this debt one way (taxes) or the other (inflation), it has been a slog.

How fast will the debt balloon from here? The Congressional Budget Office has its own ideas. Relentlessly over-optimistic, it never sees any recessions in the future, nor further bailouts and similar shenanigans that Congress may inflict on taxpayers. In its annual update in the spring, it figured that the budget deficit for fiscal 2014 would be $492 billion. In reality, the US borrowed 121% more than that to cover the fiscal deficit. Even if we subtract the $328 billion from the total to lower the debt increase to $758 billion, the US still borrowed 52% more than CBO’s deficit projection.

Even based on these iffy numbers by the CBO, the deficit is expected to decline only for fiscal 2015 and 2016, with the total debt rising at a slower rate than in recent years. That assumes that the next recession won’t wreak its havoc. That’s the good part in those projections. But then, the deficit will rise again, and the debt will pile on even faster.

But heck, that’s government accounting. Corporate accounting is similar. It’s a mix of revelation and obfuscation. In the end, real money is spent on real expenses, and if real receipts don’t suffice to pay for them, the government borrows real money. It all coagulates in the moment of truth: changes in the gross national debt. And if history is any guide, the national debt will increase far faster than the rosy projections by the CBO.

The White House submitted its budget for fiscal 2015 to Congress earlier this year. But Congress is genetically incapable of ever passing a real budget before the fiscal year starts, or actually at any time. So now into fiscal 2015, with real deficits piling onto the real mountain of debt, there is still no budget, not even the first signs of one, as Congress is too busy beating the war drums, handing all sorts of goodies to corporate America, squeezing everything and everyone within reach for campaign contributions, and engaging in no-holds-barred electioneering. The national debt can just go to heck.

One element the CBO hasn’t taken into account is the housing market. It’s a show that repeats itself every time. Read… US Home Prices Are Rolling Over (in one Chart)

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  12 comments for “Shrinking Deficit? Ha! US Government Debt Jumps by $1.1 Trillion in Fiscal Year

  1. Vespa P200E
    Oct 5, 2014 at 5:18 pm

    So this is the hope and change lemmings voted for with each US citizen on the hook for $56k each?

    What an absolute shame that we do this to our children who are also led to debt-trap early in their life with student loan for worthless degrees…

    Per http://www.brillig.com/debt_clock/

    “The estimated population of the United States is 319,152,463
    so each citizen’s share of this debt is $56,025.22.”

    • BlackThorn
      Oct 6, 2014 at 10:13 am

      I am afraid that “our children” and the “future generations” won’t be some vague group from the distant future but all of us who will still be around when the music ends. Of course this will be harder for young people who missed the party, but we will be toiling right beside them for the rest of our lives, helping to clean up the mess.

      • Jerry Bear
        Oct 7, 2014 at 3:17 pm

        Welcome to the inevitable destruction of Capitalism It is all going down exactly as Karl Marx predicted in Das Kapital a century and a half ago. either we go into socialism or we go into a new age of darkness. The current regime simply can’t survive in the long run. In the meantime, be prepared for anything.

        • Hendrik1730
          Oct 10, 2014 at 12:28 am

          You ARE already in socialism – soviet style. What’s the difference between the KGB and the NSA? The politburo and congress? The oligarchs and corporate banking America? 50 million Americans on foodstamps, 23% effectively unemployd and the remainder in debt up to their eyeballs, you tell me …

  2. Petunia
    Oct 5, 2014 at 5:46 pm

    I don’t care about the debt because there is no way to ever pay it back. If they can’t pay it back they won’t. Sorry China, Japan, ….

    • Matt R.
      Oct 6, 2014 at 3:56 am

      You’ll care soon enough when it collapses like a house of cards.

    • Goldbug
      Oct 7, 2014 at 4:46 am

      It’s not as simple as that Petunia. If we don’t repay our obligations, then no one will lend us money anymore (or at least not at a reasonable rate of interest). If no one lends us money, we cannot maintain our standard of living. That means that food and energy prices rise dramatically, which in turn means that the middle class and lower cant even afford to pay for rent and food (and the other goodies that were used to buying). In other words, well be like the rest of the world–no running water, no air conditioning, very basic food, etc.

  3. Duderino
    Oct 5, 2014 at 8:35 pm

    Wolf, I would also blame the investor community who still perceive the US government as the most solvent entity on the planet and their securities as the only safe heaven asset.

    • Oct 6, 2014 at 8:02 am

      Agree, Duderino.

      But if you give investors free money, they’ll buy ANYTHING … even Japanese gov debt, which is much worse, and yields much less than US gov debt. And if investors don’t buy that debt even if you give them free money, central banks will.

      If central banks weren’t interfering in the credit markets, things would look a lot more realistic.

      Then there’s the additional issue that the US has enormous trade deficits, and they’re funded by other countries, particularly China. So China which ends up with a lot of dollars it has to do something with.

  4. Gil Obrero
    Oct 5, 2014 at 9:44 pm

    When your salary is $10,000 and your debt is $100,000 and the cost service is now more than $10,000, what do you do.

    Do you keep working to earn the $10,000 and spend all of it on servicing an ever increasing debt, that ultimately must get defaulted on and wiped out, earning real dollars now to have them debased by inflation down the line in a spurious attempt to settle the impossible debt.

    Or do you stop paying all the debt and save whatever you can from your $10,000 income and use it to strengthen yourself both financially and health-wise.

    I t4hink that is the most sensible thing to do.
    This debt is going to collapse at some point, , I suspect strongly that it ill come first of all by deflation, which is now setting in and is endemic in the West, and especially Japan and Europe is catching up at a rate 4 times faster than Japan went down the toilet.

    The only logical next step is for inflationary pressures to build but at that point there is no backstop.
    There are no “real assets” to back any currency and the only option will be print.

    With every dollar printed feeding the pent up pressure cooker of suppressed inflation and the vast unmitigated rise in bubbles, the biggest of which, unseen, is the actual US$ itself.

    Thats when the debt gets wiped out, inflation will take care of it as it did in Zimbabwe, and its doing in Argentina and Venezuela now.

    For that reason I pay no taxes, it is pointless, it is a waste of my time efforts and labor now that will be reduced to zilch, nada, nothing when the reset comes.

    I am not going to do that, I will not labor now and dissipate my efforts on a failed and pointless exercise to
    feather the nests of the corrupt clowns.

    Everyone else can pay their taxes if they wish, but I politely decline. It is not going to happen. I would rather stop working and earning anything at all or only the limit to the tax free threshold, but I will pay no taxes again.

    History shows what happens when currencies collapse, and its not pretty and its dangerous.
    I have no intention of being led to slaughter and therefore if necessary will look at my future survival over any laws regarding taxes.

    Everything of value is off shore, and out of my name now, albeit under my control.
    I suggest all those interested in self preservation take similar steps

    • Vespa P200E
      Oct 6, 2014 at 8:06 am

      Debt is either paid off or defaulted. Sure one can “re-finance” at lower rate and all but it’s really kicking the debt can down the road often with bigger principal.

      As for US debt – most likely it will be paid off with freshly minted USD and ushering in mother of all inflation as everyone come to understand that it is all FIAT currency backed by incompetent government like Obummer and Fed Reserve the very Central Bank that did its best to serve the banksters interest.

  5. Yancey Ward
    Oct 6, 2014 at 8:52 am

    No worries. I have outsourced my thinking to Paul Krugman.

Comments are closed.