The Monthly Treasury Statement has been released, and the data reveals a continued deterioration of the deficit, which is now at around 7.3 percent of GDP on a 12-month trailing basis. The Economist recently expressed concerns that the U.S. budget deficit could reach 7 percent by the end of the decade, and it appears we are already there.

We estimate that deficits could reach around 7% of GDP a year by the end of this decade—shortfalls America has not seen outside of wars and economic slumps. – Economist

We are alarmed by the rapid decline in budget receipts, which have fallen by 10 percent during the first seven months of the 2023 fiscal year compared to the previous year, with individual income taxes down by 18 percent. The April surplus was only 57 percent of last year’s surplus, which could be partly attributed to the slowing economy and, also, many of the wealthy California counties being given extra time to file their taxes due to the earlier floods.  Maybe. 

What’s even more concerning is the toxic cocktail of declining budget revenues and increasing interest payments on the national debt, which now exceed what the U.S. currently spends on its military programs.

Deficits don’t matter…until they do.