Government Spending: Where Does It End?

On Thursday, the Treasury Department released its monthly budget statement which summarizes revenues and spending for the month of October.  After one looks at these figures, it's hard to believe that they are accurate, but unfortunately they are.  Unless you have been living under a rock for the last several years, you know that our Federal Government has been spending money at rates that would make even a sub-prime borrower blush.  But even taking this into account, these numbers are still startling, if not scary.

During the month of October, the Federal Government spent $2.30 for every dollar of revenue it took in.  Given the fact that this is the fifth time this year that the ratio has exceeded two, one might think that this type of deficit spending is commonplace.  However, going back to 1970, October was only the 13th month that the ratio ever exceeded two.  Prior to 2008, the ratio exceeded two an average of once every 6.5 years.  In the last two years, the ratio has exceeded two an average of once every three months!

The charts below highlight the twelve month rolling totals of government revenues and outlays. It doesn’t take an accountant to see that these two lines are moving in the wrong direction.  Given the fact that nobody thinks Washington is going to reign in spending, the only way to solve the gap is through higher revenues (raising taxes) or increasing the money supply.  Is it any surprise that barely a day goes by where the dollar doesn't trade down in value?

In last week's Wall Street Journal, there was an article that discussed how some unemployed Americans who are living on severance packages are depleting their savings and maxing out credit cards in order to maintain their $100K+ lifestyles.  It's ironic how we can be so quick to look down on these types of people for not being able to adjust to the new reality they find themselves in, yet at the same time barely an eyebrow is raised in DC when our Federal Government is spending like it's making $100K, even though its earnings are like those of a $42K worker.

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Comments

[David3]

"When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.

The raising of the denomination of the coin has been the most usual expedient by which a real public bankruptcy has been disguised under the appearance of a pretended payment."

Adam Smith
An Inquiry into the Nature And Causes of the Wealth of Nations
1776

[djvu]

great post again.
good going helicopter Ben & Obama!
"you can fool some of people some of the time,
you can fool all people some of the time,
but you cannot fool all the people all the time "- Abraham Linclon.
expect recession 2.0!
for all the bulls that are expecting another 20% upside from here, I only have to say. " Ignorance is bliss"
by the way, any post on the authenticity of US Reserves of 8000 tonnes of gold would be very useful.
US govt could be expected to mortgage its gold for a bailout from its global counterparts.