US Spending On Interest Hits All Time High As Budget Deficit Soars To $684 Billion

The US' spending problem is starting to become a major issue.

According to the latest Monthly Treasury Statement, in June, the US collected $225BN in tax receipts - consisting of $110BN in individual income tax, $91BN in social security and payroll tax, $4BN in corporate tax and $20BN in other taxes and duties- a drop of 2.9% from the $232BN collected last July and a reversal from the recent increasing trend...

... and in July, the 12 month trailing receipt total was barely higher compared to a year ago, up just 0.4% Y/Y after rising as much as 3.1% at the end of 2017.

Meanwhile Federal spending rose, up 9.9% from $275BN last July to $302BN last month.

... where the money was spent on social security ($83BN), defense ($49BN), Medicare ($24BN), Interest on Debt ($35BN), and Other ($111BN).

This resulted in a July budget deficit of $77 billion, in line with expectations, and a signification deterioration from the $43 billion recorded in July of 2017.

The July deficit brought the cumulative 2018F budget deficit to over $684BN during the first 10 month of the fiscal year, up 28% over the past year.

This is the highest 12 month cumulative deficit since May 2013; as a reminder the deficit is expect to increase further amid the tax and spending measures, and rise above $1 trillion as soon as next year.

Most Wall Street firms forecast a deficit for fiscal 2018 of about $850 billion, at which point things get... much worse. As we showed In a recent report, CBO has also significantly raised its deficit projection over the 2018-2028 period.

But while out of control government spending is clearly a concern, an even bigger problem is what happens to not only the US debt, which recently hit $21.3 trillion, but to the interest on that debt, in a time of rising interest rates.

As the following chart shows, US government Interest Payments are already rising rapidly, and just hit an all time high of $538 billion in Q2 2018. 

Interest costs are increasing due to three factors: an increase in the amount of outstanding debt, higher interest rates and higher inflation. Needless to say, all three are increasing; furthermore, a rise in the inflation rate boosts the upward adjustment to the principal of TIPS, increasing the amount of debt on which the Treasury pays interest, turbocharging the amount of interest expense.

The bigger question is with short-term rates still just around 2%, what happens when they reach the mid-3% as the Fed's dot plot suggests it will?

Comments

Antifaschistische Balance-Sheet Fri, 08/10/2018 - 17:17 Permalink

Ponzi is more directly directed at the private pensioners...although, SS is there too.  Ponzi because people are paying into a system that can't possibly pay them their imagined payout.  The expectation game goes on for decades...until one day, and you get told you'll only receive 28.43% of your anticipated monthly pension check.  i'm sorry.  have a nice day.

In reply to by Balance-Sheet

gdpetti Antifaschistische Fri, 08/10/2018 - 18:21 Permalink

RIght, and this is the same game of musical chairs... be it the various markets, govts, religion, educational BS.. it's all a game of chicken, a house of cards... a game of musical chairs... not IF but when the music stops.... these are all the signs of the music as the finger starts coming down on  the button to stop it.... it all happens in slow motion if you can see it happening.... super slow motion.... like watching ice melt.... we all know the problems... the same game of 'extend and pretend' because none want it to end... the music is slowing down if you listen... the game is coming to a grinding stop... like listening to music at one 1/10 the speed it's meant to be heard at... 

The Ponzi game is losing its music.... on purpose... it's all part of generating more chaos.... domestic and global... for the 'transition'... 'out with the OWO, in with the NWO'... as Mother Nature approaches.... sit back and enjoy the show.... if you know some history, you know what's in store...  WIPEOUT.

In reply to by Antifaschistische

Balance-Sheet Antifaschistische Fri, 08/10/2018 - 20:01 Permalink

Okay, I do not know what will happen to SS - I hope it is rolled into the IRS because it is an entitlement transfer and Congress can boost the payout any time it wishes as it is actually part of the budget but, sure, Congress could cut the SS benefit along with any other benefit.

If it is a non-government pension plan that simply goes insolvent because the actual rates of return are insufficient against projected rates from 30 years previously a Ponzi scheme? If the plan managers projected an average rate of 5% from T-bills in 1988 to 2018 and it turned out to be 1% was that a fraud end to end?

In reply to by Antifaschistische

ATM Balance-Sheet Sat, 08/11/2018 - 07:44 Permalink

Social Security will pay it's agreed upon benefits. You can bet on it.

The only problem will be that the value of that benefit will likely be next to nothing.

When you control the value of something you control everything. The government controls the value of the currency. It will simply strip out the value but make your promised $1500 month payment that will buy one egg if you are lucky.

That gives the bureaucrats complete cover. They will make the payments but it must be the hoarders or profiteers or bourgeoisie who have destroyed the economy! They always blame the same nebulous forces, but we know..... we know. 

In reply to by Balance-Sheet

Balance-Sheet ATM Sat, 08/11/2018 - 12:43 Permalink

You are correct of course though we have to consider the 'voting block' of those most likely to vote and there is a helluva platform plank here. If elected we bump SS 100./month across the board.

Adjusting the nominal benefit levels will always be acceptable and a path to UBI is necessary- how to evolve from the set of programs we do have to full UBI.

In reply to by ATM

Endgame Napoleon Balance-Sheet Sun, 08/12/2018 - 11:40 Permalink

But what is the [self-sustaining] funding source for the UBI? Is it income tax, which is mostly collected from a minority of taxpayers? Income tax is the funding source of the many pay-per-birth programs that reward womb-productive sex for millions of citizens and noncitizens who work only part time to stay under the income limits for those programs. 

Won’t an income-tax-funded UBI encounter many of the same problems that the SS system is experiencing. Social Security’s funding source—adequately employed citizens—is evaporating due to automation, offshoring, outsourcing and the disincentive to work, when a combination of .gov-paid sex & reproduction, plus low-wage part-time work that keeps recipients qualified for welfare, pays more than earned-only income from hard work?

How can an income-tax-fueled UBI, requiring even bigger amounts of funding due to the number of recipients, work when profits will eventually fall for those who pay the bulk of the income tax? Consumption is down due to trends like 101 million US citizens of working age out of the labor force, 78 million gig pieceworkers and 42 million EBT-eligible womb producers working part time.

The markets of wage earners, buying goods, that create a top 20% of high-income taxpayers are drying up. I guess the UBI is premised on the fabled emerging markets around the globe that enable the top 20% of US citizens to sustain massive income levels. 

In reply to by Balance-Sheet

Endgame Napoleon ATM Sun, 08/12/2018 - 11:14 Permalink

The solvency of America’s multi-pronged system of payouts to single parents and legal / illegal immigrants in single-breadwinner households with instant-citizen kids is based on income-tax collection, mostly from the wealthy who benefit from a servant-class labor market that can afford to accept part-time work and low pay that keeps them under the income limits for welfare programs.

These womb-productive citizens and noncitizens can afford to work few hours at low pay rates due to having no rent expense, no food expense, no electricity expense, monthly cash payouts for womb-productive sex and up to $6,431 in refundable child-tax-credit cash. 

Social Security’s solvency, by contrast, is based tax contributions of 7.65% from every penny earned by employed American citizens up to the $128,400 cap—or from employed persons who are not working under-the-table, avoiding SS tax, like many illegal aliens do—with employers’ contributions in an equivalent amount. SS solvency is also based on twice-as-high tax contributions of 15.3% of every penny earned up to $128,400 by the self-employed. 

The SS system was running surpluses until recently——-not because of demographics since the Millennial generation (and the non-working-age Gen Z) is naturally BIGGER than the current retiring generation of Boomers who were not paid so much by .gov to have sex and reproduce in single-breadwinner households via welfare programs and the progressive tax code. 

https://www.google.com/amp/www.pewresearch.org/fact-tank/2018/03/01/mil…

https://www.google.com/amp/s/amp.businessinsider.com/generation-z-profi…

The SS system is no longer running surpluses because 6 million breadwinner jobs were sent to cheap-labor nations in Asia and Latin America over the last few decades, in addition to increasing amounts of automation-based underemployment. 

https://www.consumerreports.org/cro/magazine/2013/02/made-in-america/in…

All this cheery chatter about “skill sets” aside, only so many people can work in the male-dominated programming industry and or in the hip-chick or mom-gang-dominated marketing industry.

Once software has been designed, they do not need as many people to maintain it. When more people are underemployed, and therefore not buying as much, they do not need as many hip, all-pre-childbearing-age girl teams of marketers or the all-mom marketing teams, watching each others’ backs while they take a ton of time off for kids.

Looks like it might be awhile before the self-driving cars drive all of truck drivers out of a job.

But what will the SS system do when the 3-D printing revolution in the currently unaffordable housing market causes these 3 groups to be underemployed, reducing the number of SS contributions even more: (1) construction workers, (2) architects and (3) civil engineers? They have just printed a 2-story building in China, so it is not just going to be tiny houses, which likely don’t put many construction guys out of work. Developers have not been producing small homes for years, claiming it is unprofitable. 

https://www.thedailybell.com/all-articles/news-analysis/how-3d-printing…

 

In reply to by ATM

Endgame Napoleon Mikeyyy Sun, 08/12/2018 - 11:50 Permalink

Many people want to blame everything that is unfair in the economy on the Jews. Ditto for white people, in general. There aren’t enough Jews in the world to blame, nor is the total percentage of white people around the globe high enough to put all of the blame in that basket. Compare and contrast the emotional reactions from so-called newspeople and celebrities when anyone dares to blame 40 years of wage stagnation on far larger groups of illegal immigrants, getting on welfare for US-born instant-citizen kids while working for beans. When citizens complain about how that undercuts Americans in the labor market, the racism label is immediately slapped on them, and they are accused of blaming immigrants. 

In reply to by Mikeyyy

withglee Someone Else Sat, 08/11/2018 - 20:17 Permalink

Because the Federal Reserve buys the majority of our debt the majority of the interest is paid to the Federal Reserve and returned to the Treasury yearly.

And what do they buy it with?

What's really going on is this:

  • Money changers institute government to protect their scams
  • Government borrows from the money changers (borrowing what the money changers don't really have).
  • Tax payers taxes go to paying money changers interest demands
  • Government makes trading promises spanning time and space (i.e. they create money)
  • Money goes into circulation as payment to employees, suppliers, contractors, etc.
  • Government never returns the money it creates (i.e. defaults on its promises). It just rolls over the debt ... paying money changers interest
  • Since government never repays, it is just plain counterfeiting
  • Defaults not reclaimed by interest collections of like amount yields inflation: INFLATION = DEFAULT - INTEREST

And it just goes on and on and on.

Institute a "real" money process and all that nonsense stops. With "real" money, inflation of the money itself is guaranteed to perpetually zero. Thus, the money changers schemes and the governments they create no longer work. Traders have no use for them.

In reply to by Someone Else

Balance-Sheet gatorengineer Fri, 08/10/2018 - 16:14 Permalink

Them damn rates are too high now :-)

Ultimately we only need to keep your net return roughly zero so if the rates were to rise to 5% then we have to run inflation at the denominated 8% rate.

Since this is currently outside the target window (2-3%) then you have to get about zero. Slowly discounting the currency relieves the weight of all these obligations whether interest payments or entitlements.Think of it as EE (Entitlements Easing)

In reply to by gatorengineer

withglee Balance-Sheet Sat, 08/11/2018 - 20:21 Permalink

Them damn rates are too high now :-)

How do you know that? The only way you can know what interest collections should be is to know what defaults are being experienced. I have never seen a "defaults" time series, have you?

You can't operate a proper "real" money process without monitoring defaults experienced. It is the key to guaranteeing zero inflation of the money itself. In a proper process: INFLATION = DEFAULT- INTEREST = zero.

In reply to by Balance-Sheet

gatorengineer HilteryTrumpkin Fri, 08/10/2018 - 15:35 Permalink

"....consisting of $110BN in individual income tax, $91BN in social security. "

So my eyebrows really raised when I saw that the social security rate, which including employers portion is 13.8 percent.  Doing the math this implies that the marginal tax rate being collected is only on the order of 16.5 percent.  Its even much lower when you realize that SS caps out at 120k.

So for all of those people saying the Rich pay their fair share this statistic alone says thats BULLSHIT.  The individual income tax collections should be 3x-4x the SS rate if the Rich were indeed paying.......(figuring in the ss cap out).

In reply to by HilteryTrumpkin

Balance-Sheet gatorengineer Fri, 08/10/2018 - 16:22 Permalink

Payroll tax is JUST tax - there never was a fund so the answer is to cancel the payroll tax and boost tax rates if this is what you really want- higher taxes all around- poor, rich, working, unemployed- 

You are a smart guy - the entire payroll tax scheme is bogus and always was right from day one. The Soc Sec Admin could be disbanded and the entire thing run out of the IRS along with all the other bogus funds.

ALL USG disbursements come directly from the UST as a combination of all revenues PLUS borrowing and Congress stipulates payouts. Want another $100.00 per month on your SocSec? Contact your Congress people with some cashola to sweeten the deal.

In reply to by gatorengineer

Kidbuck gatorengineer Fri, 08/10/2018 - 17:20 Permalink

The rich pay their fair share.

It depends upon your level of self esteem and what your definition of "fair" is.

If you think of yourself as a worthless piece of shit and therefore don't mind having your neighbor pay your way through life then fair to you is charging those smarter and more industrious than you a higher price for government. By that logic the rich should pay more for milk and automobiles, too.  And you yourself should pay more than your poorer neighbors for everything you buy.

In reply to by gatorengineer

withglee gatorengineer Sat, 08/11/2018 - 20:25 Permalink

So for all of those people saying the Rich pay their fair share this statistic alone says thats BULLSHIT.  The individual income tax collections should be 3x-4x the SS rate if the Rich were indeed paying.......(figuring in the ss cap out).

Why should the "rich fair share" be any different than anyone elses fair share? Are the rich somehow consuming more government services than us mere mortals? Why shouldn't everyone pay the same amount? We're not a communist country are we? We've sure spent lots of lives and treasure trying to nail those commies! Now you suggest "we are them".

In reply to by gatorengineer

Endgame Napoleon gatorengineer Sun, 08/12/2018 - 12:33 Permalink

Since I started looking at it a few years ago, they have raised the SS-taxation cap 4 or 5 times. It is now at $128,400. When I first started looking it up, it was $90k. 

https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/fic…

The number of working-age US citizens out of the labor market might have something to do with the need to adjust the cap. I have no idea.

Due to the accelerated cap-raising, the wealthy have an interest in employing more US citizens—or in importing more than the current 1.5 million new legal immigrants each year. The umpteen-million illegal immigrants only pay SS tax on [traceable] income, which keeps them under the income limits for pay-per-birth welfare programs.  

Many legal immigrants, too, are welfare-eligible, indicating that they are let in this country based on their ability to procure part-time work in single-breadwinner, womb-productive households. Part-time work keeps them under the extremely low income limits for monthly welfare, but it does not generate much SS revenue.

Welfare covers the rent, grocery and electricity expenses of womb-productive citizens and noncitizens in single-breadwinner households. Monthly cash assistance, in addition to refundable child-tax-credit cash up to $6,431, ramps up the cash flow for non-income-tax-paying womb producers. 

When I worked at the Department of Human Services around a decade ago, to qualify for free EBT food and monthly cash assistance, applicants needed to make less than $900 per month in a single-breadwinner household with kids. The earned-income limit for cash assistance was about $50 per month lower than the income limit for EBT.

The rich support this welfare-rigged labor market that keeps wages impossibly low for non-welfare-eligible citizens, struggling to live on earned-only income, not just because it provides them with a servant class, willing (and able) to accept low pay and part-time hours since their major monthly bills are eliminated when they produce instant-citizen kids, but because they think it helps to avoid cap-raising in the Social Security system. 

It doesn’t. 

Due to the complexity of the income-tax code, big corporations with top-flight accounting teams can get around paying high rates of income tax, but the SS system is not so much Ponzi-like as transparent. To avoid paying their fair share of SS tax, corporations have to leave their country via offshoring 6 million jobs and outsourcing just as many. 

Might be simpler to employ some of the 101 million working-age American citizens who are out of the labor force or the 78 million gig pieceworkers, not just the dual-high-earner assortative-mate parents who keep two family-friendly breadwinner jobs with benefits under one roof and 42 million employed-in-name-only citizens and noncitizens who qualify for EBT (and much more) since they work only part time in womb-productive households. 

That would bring in more SS contributions from [employees], possibly reducing the need to raise the SS cap on the wealthy every five minutes.

In reply to by gatorengineer

libertyanyday Free This Sat, 08/11/2018 - 03:07 Permalink

any idiot knows that the debt is going to keep increasing, interest keeps increasing..........there is no relief and the ONLY way out is financial collapse.........like we all knew venezuela was going to hyperinflate the usa is going to default..........  I wouldnt be a holder of us debt...........

In reply to by Free This