Budget Deficit: Annual Interest Expense Increases 40% Compared to Last October

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    by Peter Schiff, Schiff Gold:

    The Federal Government ran a $430 billion deficit in September. It was the largest monthly deficit since March 2021 when the last Covid stimulus bill was passed. The massive surge this month was due to another Biden giveaway in the form of $437 billion in student loan forgiveness.

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    Figure: 1 Monthly Federal Budget

    Looking historically at the month of October shows that this is actually the smallest October deficit since 2017. This is mainly due to revenues having increased 35% since 2017 and is even up 12% just since last October.

    Figure: 2 Historical Deficit/Surplus for October

    For the decade before Covid, this October was 18.5% below the average October of $108B.

    Figure: 3 Current vs Historical

    The Sankey diagram below shows the distribution of spending and revenue. The Deficit represented 21% of total spending. More importantly, Net Interest represented 10.6% of total expenditures, which is up from only 6.6% last October.

    Figure: 4 Monthly Federal Budget Sankey

    Looking at the TTM, the Deficit was nearly the same relative size of October at 20.8% of total expenditures (vs 21.6%). Net Interest relative to all expenditures was 7.8%, up from only 5.2% a year ago. This represents a relative increase of 50% in one year!

    Figure: 5 TTM Federal Budget Sankey

    Total revenue fell MoM, as Corporate Taxes dropped. Corporate Tax revenue is fairly volatile MoM as shown below.

    Figure: 6 Monthly Receipts

    Total Expenses fell quite a bit this month, even compared to August and other months in 2022. October was the smallest expenditure month since January, and the second smallest going back to November 2020.

    Ignoring the September Education expense, the fall in Spending this month was primarily driven by a drop in Medicare (-$103B in September vs -$18B this month) and Veterans Benefits (-$35B to -$11B).

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