Washington DC continues to spend much more than it gets in revenue. In the Calendar Year of 2023, the federal government spent $6.3 trillion, but only collected $4.5 trillion in taxes. This $1.8 trillion gap drove the national debt to $34 trillion in December 2023. And it is only going higher.
One problem with these budget numbers is that government accountants, rightly or wrongly, lowered spending in 2023 by about $300 billion after the Supreme Court struck down a large part of President Biden’s proposal to forgive student loans. That legal decision didn’t change the government’s cash flow last year in any significant way, but it did let the Department of Education “write up” the value of its loan portfolio by about $300 billion. This, they counted as “negative spending,” which then reduced the official budget deficit. So, while the reported deficit in 2023 was $1.8 trillion, the Treasury needed to borrow more than $2 trillion to make ends meet.
The high levels of borrowing are causing some investors to fear some sort of imminent and unprecedented snowballing of federal debt. Continual borrowing will lead to skyrocketing interest rates (and higher interest payments), which will lead to severe problems in the financial system.
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