The January government budget release revealed a widening deficit, reaching $840 billion for the current fiscal year. This significant increase, driven by rising spending and modest revenue growth, has sparked concerns about the long-term health of the US economy. Meanwhile, House Republicans unveiled their budget proposal, aiming for substantial tax cuts and spending reductions. Critics argue that the plan would exacerbate the national debt, while Republicans project it would stimulate economic growth.
The monthly government budget release is typically a pretty sleepy one. I know, because I'm sitting there at 2 p.m. Eastern most of the time, watching markets shrug it off--even as the numbers have climbed higher and higher over the years.
We ended last year with a $1.8 trillion deficit. We are now at $2.1 trillion on a rolling 12-month basis. So yes, there were some one-off reasons for the extra-large January deficit this year--specifically, February payments were logged in January because Feb. 1 fell on a weekend, as the Committee for a Responsible Federal BudgetTreasury Secretary Bessent has a stated goal of reducing the deficit to just 3% of GDP.
Remember--each year we run deficits, that has to be financed by issuing more debt. Each new dollar of debt has to have interest paid on it. And because rates are high, those interest payments are now one of the biggest sources of annual government spending, which makes it harder to close the deficit. You can see the"doom loop" people worry about.
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