Out-of-Control Government Spending Will Break America... And It Just Got Worse

Deficits, Deficits, and More Deficits

I previously wrote to you about how the dire situation of government debt and unchecked spending is pushing the U.S. toward economic ruin.

I used the analogy of a snowball rolling downhill, picking up speed and size along the way. It's a fitting one, because as I'll show you today, not only is the situation getting worse, but it's also degrading at an accelerated rate. This is all based on the latest deficit projections that just came out. So, let's dig in...

Every six months, the Congressional Budget Office (CBO) puts out a new “Budget and Economic Outlook” covering the next decade. The last one in February predicted a $1.5 trillion federal deficit for 2024.

Now, it's not uncommon for the CBO to update their annual outlook as new data comes in throughout the year. You usually get a routine adjustment. Nothing out of the ordinary. But the CBO's June update, released recently, caught my attention for just how dire the whole deficit situation has become.

In short, the CBO now predicts the government will overspend by $1.9 trillion. That’s a staggering 27% increase, or about $0.4 trillion more, compared to the agency's projections from February 2024.

Where will the money to cover this shortfall come from? More debt, of course. The government will need to borrow this amount this year, further adding to the existing $34.8 trillion it already owes.

Okay, but what's behind the extra $0.4 trillion in expenses?

One might hope that if we're going deeper into debt, we'd at least get more services or goods in return. Anything, really.

Nope.

According to the CBO, one of the main reasons for the change in their estimates is the money needed for “Ukraine, Israel, and countries in the Indo-Pacific.” That’s $95 billion. On top of that, $70 billion goes to rescue failing banks through the Federal Deposit Insurance Corporation (FDIC)… and another $100 billion (more than expected) for student loan forgiveness.

So, there you have it. That's your taxpayer money hard at work, going to other countries, banks, and paying for other people’s student loans.

Figures Straight Out of a Spine-Chiller

But here’s where it gets even worse…

If you open the updated report, and scroll to Page 19, you'll find Table 1-1: CBO’s Baseline Budget Projections. Look for the line labeled "Total Deficit." These are government deficits projected into 2034, and I've highlighted them in the next image.

If you look at the number all the way on the right, you'll see that the total cumulative deficit from 2024 to 2034 is projected to hit a staggering $22.08 trillion. Alarmingly, that's $2.1 trillion, or 10% more than the agency's projections in February 2024.

Now, the CBO predicts that the U.S. Gross Domestic Product (GDP) will grow to about $41 trillion by 2034. This means that if the government ends up needing to borrow another $22 trillion to cover overspending, it would be more than half of the entire GDP. But the U.S.'s current $34.8 trillion debt is already at about 125% of GDP. When a nation already spends more on interest payments on the debt than on national defense, that much more debt could easily break the economy.

It's worth pointing out, the CBO isn't expecting any major crises over the next decade. They're not banking on the possibility of a war, a new financial meltdown, or another pandemic. On the contrary, the CBO report is filled with reassuring assumptions about the future of the U.S. economy: low interest rates, low inflation, and solid GDP growth.

This means that if anything goes awry, which it almost certainly will, their current ($22.08 trillion) forecast could get a lot worse.

Keep in mind, this update came out just over four months after the original report. In other words, it took just several months for the CBO to admit that things are probably much worse than originally anticipated. At this rate, we might soon be reading about deficits doubling to $4 trillion next year.

If this doesn't clearly signal that the U.S. is swiftly moving towards total fiscal collapse, I'm not sure what would.

Regards,

Lau Vegys