As US Debt Hits New Record, Fiscal 2012 Tax Revenues Are 10% Higher Than Debt Issuance

Today, the US total debt rose by $32 billion touching on a new record high of $15.392 trillion. As a reminder this is just the beginning: as we noted yesterday, according to the president's own budget total US debt is now expected to surpasses the greatest and final debt ceiling of $16.4 trillion just around September, and likely sooner with the addition of the $160 billion in additional debt needed to fund the extension of the Bush temporary yet perpetual tax cut through the end of 2012. So while we know that total debt to GDP is already over 100% and unlikely to ever decline back to double digits, thus putting into question the marginal utility of debt to generate further economic growth, another just as important question is what is the incremental utility of tax revenue relative to debt issuance, i.e., is America now issuing more debt than it is collecting from tax revenues: a step which would further cement its status as a banana debt republic. The chart below should provide some comfort in that regard. In fiscal 2012, starting October 31 through today, the US has collected $677.6 billion in withholdings taxes, while issuing $601 billion in debt over the same period of time. In other words, for now at least tax revenues are running 12% above debt issuance. Alas, considering that according to the president's own budget there is another $1 trillion in debt issuance over the next seven and a half months, we have a very distinct feeling the red line will cross the blue line yet again, and quite soon at that. Naturally, a logical question arises: why not just do away with taxes entirely and have all US capital needs be debt funded? After all, all that "saved or created" tax money would be used to buy bonds or better yet, iBonds, or something just as silly. And the USD would never, ever, lose its status as reserve currency...

Cumulative Fiscal 2012 YTD debt issuance vs tax withholdings.


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