Deficit Spells Looming Disaster For America
The United States’ path toward an ever-growing federal spending deficit is leading the country to a dangerous precipice. The figures are staggering and the implications even more problematic.
According to the U.S. Treasury, data from September 2023 revealed that the deficit for the entire year was $1.7 trillion, a $320 billion increase from the previous year. This figure equates to 6.3% of the GDP, up from 5.4% in 2022. Such a drastic rise indicates that the U.S. could be facing its worst GDP growth, excluding debt increases, since 1929, placing the country in a recession masked by deficit spending.
The Biden administration’s attempt to mitigate this situation through tax increases has proven futile. Despite the tax hike, government revenues have seen a 9.3% decrease compared to 2022, amounting to $4.4 trillion or 16.5% of the GDP. This shortfall is primarily due to a $456 billion reduction in individual income tax receipts and a $106 billion drop in Federal Reserve earnings deposits due to higher interest rates.
The idea that taxing the rich can eliminate the deficit is a fantasy. There is no plausible way for the government to generate an additional $1.7 trillion in taxes annually, regardless of the economy’s growth. With public debt already standing at a colossal $33.6 trillion, the administration’s estimated accumulated deficit from 2023 to 2024 will cause public debt to skyrocket by an additional $14 trillion.
The root cause of the deficit lies in government spending, which history and logic show leads inevitably to inflation, as witnessed by the persistent inflationary problem we face today. Even if the Federal Reserve had intervened to avoid an increase in the cost of debt, the deficit would still have remained above $1.6 trillion. Even if tax receipts had met government estimates, the annual deficit would have exceeded $1.3 trillion.
The stark reality is that high government spending has not resulted in higher growth or rising real wages. This, in turn, threatens the U.S. dollar’s status as the world’s reserve currency, especially with countries like China selling government bonds at a rapid pace and the U.S. 10-year Treasury yield exceeding 5% this week for the first time in decades.
Compounding the situation are the military commitments in Israel and Ukraine. In a recent 60 Minutes interview, Joe Biden asserted that the U.S. has the capacity and obligation to support Israel and Ukraine. However, the reality of the military goals in each conflict paints a different picture.
In Gaza, the goal is to defeat Hamas, which requires a massive expenditure of resources. Similarly, the American public has already been forced to provide $44 billion and substantial military equipment for the conflict in Ukraine, with no significant gains.
The financial burden of these military campaigns, combined with an already strained economy, paints a bleak picture. The American public ultimately bears the cost of war through direct taxation or the subtle yet equally damaging inflation tax. This means that the wealth of the American public is being indirectly confiscated to fund wars.
The United States is on a dangerous path with its soaring deficit and open-ended, vague military commitments. The need for fiscal responsibility and reevaluating foreign military engagements is more urgent than ever. We can only hope to secure a more stable and prosperous future for America by addressing the root causes of the deficit and the financial drain of military campaigns.
