There’s a big problem that pretty much everybody is ignoring.
In just two months since Congress reached a deal and suspended the debt ceiling for two years, the national debt has surged by a staggering $1.2 trillion.
Within a week of the debt ceiling suspension, the national debt cracked $32 trillion and as of July 28, it stood at $32.66 trillion.
I warned that we would see a big jump in the national debt with the passage of any debt ceiling deal. After nearly six months up against its borrowing limit, the federal government had some ground to make up. It needed to replenish cash reserves and unwind the extraordinary measures it took to keep the government running while it couldn’t borrow any money. But the pace of borrowing even surprises me.
Meanwhile, the US government continues to run massive deficits month after month. With three months left, the fiscal 2023 budget deficit had already eclipsed the massive 2022 shortfall.
Now, you might be thinking that with the spending cuts in the [misnamed] Fiscal Responsibility Act, Congress fixed this problem. But we live in an upside-down world where spending cuts mean spending still increases.
Even if Congress and the president manage to stick to the plan, the so-called spending cuts will not put a dent in actual total spending. That means we can expect massive deficits to continue month after month. And it’s only a matter of time before Congress and the Biden administration abandon the pretense of spending cuts to address the next crisis.
The government also faces declining tax receipts. The combination of big spending and declining revenue means more borrowing is coming down the pike.
There are two types of Treasury Department securities.
“Nonmarketable” securities included inflation-protected I-bonds that customers can buy directly from the Treasury, along with securities that entities such as government pension funds and the Social Security Trust Fund can hold. These do not trade on the open market and make up a relatively small ($6.9 trillion) amount of the total debt.