US budget crisis worsens
US government spending rose sharply in July – by 15 per cent at once
Source: thepublicdiscourse.com
But revenues fell as much as 9% – and such a drop can be considered indirect evidence of the approaching recession.
The US financial authorities managed to reduce the inflation rate from 9% a year ago to 3% now by raising the key rate. But the side effect was stagnation in the economy, turmoil in the mortgage market – and worsening debt problems.
In June, the U.S. budget deficit hit a record $228 billion. Since the beginning of 2023, the deficit has already totalled 1.4 trillion – and could reach an unprecedented 2 trillion by the end of the year. In one year, the deficit has grown by as much as 170 per cent – and it will continue to grow because of falling tax revenues against the backdrop of general stagnation.
And the cost of servicing the U.S. government debt is already $900 billion – and could reach $1.5 trillion over the next 12 months. Treasury bond yields are at 16-year highs – so spending on government debt will continue to rise.
Paying interest on the national debt is becoming the main expenditure item for the US government, surpassing both the military budget and social spending. Servicing the national debt will take up to a quarter of the US budget. And if it continues to grow at the same rate, by 2030, half of the entire budget will be spent only on interest payments on the national debt. This is already the level of many pre-default countries in the Global South. And against the backdrop of de-dollarisation – and falling interest in US bonds – it will be increasingly difficult to maintain the government debt pyramid.
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