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US Tax Revenue Swallowed by Debt Interest

US Tax Revenue Swallowed by Debt Interest

Mar 25, 2024

US Tax Revenue Swallowed by Debt Interest

In a sobering assessment of the United States' fiscal health, recent data has revealed a concerning trend where federal government spending has vastly exceeded its tax revenue. Last month, the U.S. Treasury's coffers were fed by $271 billion in tax receipts, yet the government's expenditures soared to $567 billion—more than double the collected amount. These figures have pushed the federal deficit to the second highest on record, trailing only behind the extraordinary spending witnessed during the COVID-19 lockdowns.

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The stark reality of these numbers has laid bare the burgeoning 'welfare-warfare complex.' Approximately $224 billion went towards Social Security, Medicare, and veterans benefits, while the remaining $343 billion was allocated to wars, welfare, and servicing the monumental federal debt. Interest payments on this debt are now consuming a staggering two-thirds of individual income tax revenue, underscoring the gravity of the fiscal imbalance.

Amid this backdrop, federal tax receipts have seen a decline when adjusted for inflation since 2021, hinting at underlying economic distress that belies government statistics. This decline in tax revenue is juxtaposed with a 50% surge in federal spending since the onset of the COVID-19 pandemic. To illustrate, federal spending has jumped from under $400 billion per month pre-COVID to nearly $600 billion in recent times, contributing to a February deficit of nearly $300 billion—a 13% increase from the previous year and setting a trajectory for a $2 trillion deficit for the year.

The deficit, now a fiscal albatross, has precipitated a $1 trillion increase in federal debt in the past 100 days alone, translating to an unsustainable annual rate of $3.5 trillion or $28,000 per U.S. household. This scenario is akin to charging $2,300 to the national credit card monthly without any repayment plan in place.

The financial quagmire extends to the interest payments on the burgeoning debt. Of the $120 billion collected from individual income taxes last month, a whopping $76 billion was earmarked solely for interest on the debt, a payment that does not even begin to reduce the principal amount.

The trajectory is clear and disconcerting. With every passing month and each new tranche of debt, the United States inches closer to a point where tax revenue could be entirely consumed by debt obligations, leaving all new spending to be financed through further debt or currency creation.

As these developments unfold, the federal government appears to be entrenched in a Ponzi-like financial stage, with the 2008 crisis and the COVID pandemic having significantly exacerbated the situation. The inevitable question arises: how will this end? History suggests the answer lies in a cycle of inflation, mass defaults, and a sovereign debt crisis, the timing of which remains uncertain but inevitable.


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