Exponential Growth in Fiscal Irresponsibility: Federal Deficit Grows $342 Billion in First Two Months of 2020 Fiscal Year

Introduction

Congress, the Grand Stewards of the Federal Government’s treasure chest, have continued down the road of fiscal perdition. How? For the first two months of the Fiscal year of 2020, the United States Federal Government’s deficit has grown $342 billion, per the Congressional Budget Office. This represents a 12 percent increase over previous periods. Based upon the CBO, the Federal Deficit will average $1.2 Trillion per year between 2020 and 2029.

What Does This Mean?

With the proliferation of federal government spending, combined with ever increasing budget deficits, this leads to more activity of the growth of the government debt. Debt security instruments, such as United States treasuries, are sold to obtain cash in order to “true up” the deficit. Purchasers of Government debt can be foreign nations, but on the domestic side, The Fed is the largest purchaser of Government Securities. Back to the transaction, once this transaction takes place, this expands the money supply. It is expanded with injecting the cash, by the sale of the treasuries, into the money supply when the fed purchases them. The Fed’s balance sheet continues to grow along with the ongoing purchasing of debt securities. A quick reminder of the concept of inflation: It is the expansion of the monetary base.

The Road of Fiscal Perdition

With the expansion of the federal government entitlement programs, such as Medicare, Medicaid, and Social Security, it only makes sense that the deficit will average $1.2 trillion per year over the next decade. As the baby boomers begin to draw down social security benefits, the demand for health care will rise. This will place a strain on resources, pushing health care costs upward.
Also: Inflation has a deleterious impact upon savers and individuals that are on a fixed income. Since the value of the currency declines, this reduces the purchasing power for goods. This creates a situation that more individuals become more dependent on Medicaid and other Government social programs.

Conclusion

Due to the overwhelming use of government resources, the deficit will continue grow. This will lead to more borrowing, which will lead to more inflation, which leads to more individuals struggling to cover their expenditures. Good luck building wealth in this economic environment.

Excursus

Read the CBO report here: https://www.cbo.gov/publication/55551%20%C2%A0

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