Were expenses in FY 2023 distorted and is the FY 2024 deficit understated?

 The U.S. federal government’s fiscal year came to a close on September 30 and the budget execution data has just been published. It received $4.4 trillion in revenue collections and had $6.1 trillion of outlays, leaving a deficit of $1.7 trillion, the equivalent of 6.3% of gross domestic product (GDP). In 2022, the deficit was $1.37 trillion. These figures, however, are distorted. In 2022, the administration included as an expense a $379 billion plan to forgive student debt, but this plan never executed, as it was struck down by the Supreme Court in June. The $333 billion reversal was recorded this year as lower spending in 2023.

Taking this into account, the deficit more than doubled to $2 trillion (7.5% of GDP), a bar only surpassed during the two years of the pandemic. The main cause was the 9% drop in revenues.   https://www.msn.com/en-us/money/markets/the-united-states-is-entering-a-tax-crisis-with-skyrocketing-deficits-and-debt/ar-AA1j679P

Is this true?  Let's look at the expenses for the Department of Education.  The actual expenses in 2022 were $639 billion, and preliminary for 2023 were -$41 billion.  If you undo the adjustment, in 2022 the expenses for Education would be $260 billion (639 - 379), and in 2023 they would be $292 billion (-41 + 333).   So it looks like they were distorted.

What do we expect Education expenses to be in FY 2024?  After a quick search, I can't find the answer.  But in FY2020 the DOE spent $204 bn, and in FY2021 it spent $260 bn.  (In FY 2019, the gross cost was $154 bn with $32 bn revenue for a net cost of $122.)

I really don't have a handle on this.  But let's for a minute assume that revenue and expenses for FY 2024 will be exactly the same as 2023 (without the student debt weirdness and with $292 bn for the DOE).  That means the revenue would be $4.4 trillion and outlays would be $6.5 trillion.  So we are facing a $2.1 trillion deficit in FY 2024.  Or maybe worse.  The net interest in FY 2023 was $659 billion, and in FY 2024 it should be $800 billion (rounded to the nearest $50 billion).  So really the base case is a $2.2 trillion deficit this fiscal year even if all spending (except interest) were frozen at current levels.  Am I reading this right? $2.2 trillion divided by 12 is $180 billion (rounded).  October is almost over.  Are we really expecting $180 billion deficits every month on average?

Ghostbusters

"How do you vanquish evil entities? For this Denver exorcist, the devil is in the details" 

See:  https://www.denverpost.com/2023/10/27/denver-exorcist-tony-bulota-spirits-devil/

And here is their website: https://www.quietus.ltd/our-motto

"There are few who would dare stand upon the precipice and stare into the Abyss, for the Abyss stares back.  Fewer still would stare and observe the shadows and what lurks there it to benefit and safe guard others. Enter the founding members of Quietus Ltd.  They chose to stand in harms way, to know the face and the ways of the darkness to better stop its uninvited encroachment. Since those first days, Quietus Ltd has become a vital resource for those who are experiencing "Worst Case Scenarios", where other attempts at resolution have failed or made the situation worse.  For this reason, some call the members of Quietus Ltd "energetic bouncers" or "Spiritual Special Forces", others refer to them as the "Metaphysical Men in Black."

GDP is now $27.6 trillion

 Current dollar GDP increased 8.5 percent at an annual rate, or $560.5 billion, in the third quarter to a level of $27.62 trillion. https://www.bea.gov/news/2023/gross-domestic-product-third-quarter-2023-advance-estimate

Debt to the public is at $26.5 trillion, so the ratio is 96.0%.

The Fed probably thinks this is too high (since most of it is inflation rather than real GDP growth), but this is really really good news from a fiscal sustainability standpoint. For example, the last CBO 10 year forecast released in May 2023 shows the GDP at the end of fiscal year 2024 (i.e. September 30, 2024) is $27,266 billion and we are already much bigger than that one year in advance.

I think the Fed should just let the animal spirits roar and let the good times roll and don't take away the punch bowl while the party is getting going (to mix a few metaphors).  If GDP continues at an 8% annual clip  and the debt increases at only an 6% clip then maybe we can grow ourselves out of this mess a little.

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Update (11/29/23):  The BEA now says that GDP in the 3rd quarter increased at an annual rate of 8.9% to $27.64 trillion.  

$5 Trillion Deficit in 2025?

 This is hypothetical but there is a decent chance (40% ?) that this could happen.

Read this: https://www.zerohedge.com/news/2023-10-23/unprecedented-fiscal-doom-loop-getting-worse

So as the economy moves into recession in 2024 (as we believe), the US could be looking at deficits as  high as 20% of GDP ($5 Trillion) if the economy slows dramatically. 

(Note: The GDP is now $26.8 trillion, so 20% of that is $5.36 trillion.)  So the reason I say 2025 instead of 2024 is that it will take a while (6-9 months) to realize that we are in a recession and for the government to take action.  The recession may start in January 2024. The stimulus will mostly occur in 2025.  2023 revenues were $4.4 trillion and expenditures were $6.1 trillion.  If revenues drop another 20% to $3.5 trillion, and there is a stimulus of $3 trillion (extended unemployment, tax credits, bailouts etc), then there is $9 trillion in spending vs $3.5 trillion in revenue and a $5.5 trillion deficit.  This is not too far-fetched.

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Ok, even if there is no recession in 2024, there is another problem in 2025 or 2026, which is expiring tax cuts (which will probably be extended) and expiring expenditures (which will probably be reinstated).

Read: https://www.nationalreview.com/magazine/2023/10/16/the-mother-of-all-fiscal-cliffs/

The mother of all fiscal cliffs is coming in 2025, and we’re not ready for it. About $5 trillion in new debt that’s expected to hit in 2025. That’s five times the level of the 2009 stimulus bill responding to the worst economic crisis since the Great Depression, and it’s expected to come in a time of no wars, low unemployment, and a growing economy. A new administration will begin in January 2025, and the first year is usually a time to reward the people who helped get you elected, not to cut the deficit. Simply extending all these provisions would add about $5 trillion to the debt over the ten-year budget window, with about $3 trillion of that coming from extending the tax cuts. But it’s even worse than that. The discretionary-spending caps from the debt-limit deal also expire in 2025, and the debt limit will need to be raised again.

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Update (11/1) See this quote from Lawrence Leperd:

Larry says about our worsening financial picture in the U.S.:

“By the way, you know, we're gonna have to start thinking about what comes after, you know, a trillion. I mean, I think it's a quadrillion. And, uh, because, you know, at the stage, at the rate that we're going, it is becoming exponential. And that's, of course, why I believe that this monetary system is doomed. It's just— there's— it's absolutely doomed. I'm— I hate to say that, and I'm not trying to be a doomsayer or fearmonger. I just think it's basic math.”

“There appears to be zero fiscal restraint in Washington D.C. They are behaving as if there’s no consequences but the 10 year is saying ‘oh, there will be consequences, alright,’” he adds.

https://quoththeraven.substack.com/p/time-to-think-quadrillions-as-theres

Debt to the Public hits $26.5 Trillion

 On 10/17/23, Debt to the Public was $26,514,681,646,246.71 .  It seems like it was last month that it was at $26.0 trillion.  The public debt to GDP ratio is now at 98.9%.

If the doubling time is 9 years, then we can expect that on about 10/1/32 this should be at $53 trillion.

The IMF may warns that US Debt Looks Unsustainable

 Read: https://markets.businessinsider.com/news/bonds/us-debt-crisis-government-spending-unsustainable-defaults-interest-rates-imf-2023-10

"The US's $33 trillion debt pile is reflecting "unsustainable" fiscal policy, the IMF said."

The source quoted in the story is a link to an interview at:

https://www.imf.org/en/News/Articles/2023/10/10/tr101023-transcript-of-october-2023-world-economic-outlook-press-briefing

See also    https://www.imf.org/en/News/Articles/2023/10/11/introductory-remarks-to-the-fiscal-monitor-press-conference-vitor-gaspar

Deficit of $166 Billion in September

 The government incurred a deficit of $166 billion in September 2023, CBO estimates, $264 billion less than the deficit recorded in September 2022. The federal budget deficit was $1.7 trillion [actually $1.690 trillion] in fiscal year 2023, the Congressional Budget Office estimates—$0.3 trillion more than the shortfall recorded during fiscal year 2022. Revenues fell by an estimated $455 billion (or 9 percent). Revenues were smaller than in fiscal year 2022, particularly for nonwitheld income taxes and remittances to the Treasury from the Federal Reserve. Outlays declined by an estimated $141 billion (or 2 percent).

Monthly net interest was $67 billion.  Monthly defense spending was $82 billion (774 - 692).

  Monthly Budget Review: September 2023 (cbo.gov)

How does this stand up against my diagnostic questions?

1. Monthly deficit less than 0.6% of the debt to the public.  (If this is true, then the doubling time is 10 years or more).  The debt held by the public was $26.044 trillion on Sept 1, and 0.6% of this is $156 billion, so FAIL.

2. Debt to the Public less than 101% of GDP.  The Debt to the Public is $26.34 trillion but the GDP is $26.8 trillion.  PASS.

3. Net interest is less than defense spending.  PASS.

4. Net interest is less than the primary deficit (which is the deficit excluding interest). PASS.

5. Net interest is less than 25% of tax revenues.  Tax revenues were $469 billion in September. PASS.

6. Net interest is less than $85 billion for the month. ($85 billion is $1 trillion / 12, rounded up).  PASS.

7. The Debt to GDP ratio is increased less than 2% from the previous year.  The current debt to the public/GDP ratio (as of 10/1/23) is 98.3%.  It was at 92.9% just about six months earlier.  FAIL.

That is more passes than fails. So September was a good month.  But watch this space - the day is coming, not too long from now when these will all be fails.

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Update:  The final numbers show a deficit of $171 billion in September 2023, and a deficit for the year of $1.695 trillion.  This also says that net interest for September was only $29 billion, which seems way too low.

See also https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0923.pdf

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The national debt on 9/30/23 was $33.167 trillion.  One year earlier on 9/30/22 is was $30.929 trillion.  So it increased 7.2% in one year.

The Great Taking

 Read this blogpost: https://www.theburningplatform.com/2023/10/11/demolition-by-derivatives-when-will-the-banksters-trigger-that-quadrillion-dollar-market-implosion/

which recommend this online book, which I haven't read: https://thegreattaking.com/

Introduction:

What is this book about? It is about the taking of collateral, all of it, the end game of this globally synchronous debt accumulation super cycle. This is being executed by long-planned, intelligent design, the audacity and scope of which is difficult for the mind to encompass. Included are all financial assets,

all money on deposit at banks, all stocks and bonds, and hence, all underlying property of all public corporations, including all inventories, plant and equipment, land, mineral deposits, inventions and intellectual property. Privately owned personal and real property financed with any amount of debt will be similarly taken, as will the assets of privately owned businesses, which have been financed with debt. If even partially successful, this will be the greatest conquest and subjugation in world history.

Who is the author? David Rogers Webb.  I don't know. I have never heard of him before, and can't find out anything about him except that he is the author of this book.  Although he appears in an SEC filing.  He may be legitimate but I am not vouching for him or for his book.  But it looks interesting.

Read also: https://redpillreports.com/learn/who-owns-america-cede-dtcc/

See also: https://ellenbrown.com/

Diagnostic

 Here is a checklist of the situation with the government debt.

1. Monthly deficit less than 0.6% of the debt to the public.  (If this is true, then the doubling time is 10 years or more).  For August because there was a surplus, PASS.

2. Debt to the Public less than 101% of GDP.  The Debt to the Public is $26 trillion but the GDP is $26.8 trillion.  PASS.

3. Net interest is less than defense spending.  For August, net interest was $72 billion, but defense spending was $62 billion.  FAIL.

4. Net interest is less than the primary deficit (which is the deficit excluding interest).  For August, because there was a surplus. FAIL.

5. Net interest is less than 25% of tax revenues.  For August, FAIL.

6. Net interest is less than $85 billion for the month. ($85 billion is $1 trillion / 12, rounded up).  PASS.

7. The Debt to GDP ratio is increased less than 2% from the previous year.  The current debt to the public/GDP ratio (as of 9/1/23) is 96.9%.  It was at 92.9% just a few months earlier.  FAIL.

If these are all fails then the situation is completely out of control.  So things aren't that bad, yet.