The federal government's budget deficit was “only” $21.93 billion in January.

That was a significant improvement over the $129 billion shortfall recorded in December.

But don’t throw the confetti.

The smaller deficit was primarily due to increased government receipts thanks to a big drop in tax refunds. But the Biden administration is still spending like a drunken sailor. (No disrespect to drunken sailors.)

Meanwhile, interest payments on the rapidly ballooning national debt continue to expand at breakneck speed.

Through the first four months of fiscal 2024, the federal government ran a $531.86 trillion deficit, according to the latest Monthly Treasury Statement. That is a 16 percent increase over the same period in fiscal 2023.

These massive monthly budget shortfalls are pushing the national debt higher at a dizzying pace. On December 29, the national debt eclipsed $34 trillion for the first time. When Congress effectively eliminated the debt ceiling on June 5, the national debt stood at a "mere" $31.46 trillion. As of Feb. 9, the national debt stood at $34.2 trillion.

According to the CBO, debt held by the public is projected to balloon from $26.2 trillion to $48.3 trillion by the end of 2034. That would represent 116 percent of GDP and would be the highest level on record.

The US government has a spending problem

The federal government is a little like a drunk dude up late shopping on Amazon.

The Treasury reported $477.32 billion in receipts last month, a January record. Collection of payroll and income tax withholdings helped boost government revenue. The IRS has also cleared a backlog of delayed income tax filings from the pandemic year.

But even with this revenue windfall, the U.S. government still ran a deficit. That’s because it is addicted to spending money.

In January, the U.S. Biden administration blew through $499.25 billion, also a January record.


Spending was up 2.7 percent over January 2023, even without any one-time outlays. Last year, January spending was boosted by a $36 billion bailout of a Teamsters union pension fund. If you factor out that one-time expense, federal spending rose nearly 11 percent year-on-year.

This underscores the fact that the fundamental issue isn’t that the U.S. government doesn’t have enough money. The fundamental problem is that the U.S. government spends too much money. Despite the pretend spending cuts, and promises from the Biden administration that it would save “hundreds of billions” the debt ceiling deal (aka the [misnamed] Fiscal Responsibility Act) didn’t address that problem. No matter what you hear about spending cuts, the federal government always finds new reasons to spend more money.

The interest rate problem

These big budget deficits are happening during a time of sharply rising interest rates. This is a big problem for a government that primarily depends on borrowing to pay its bills, and it is likely one of the reasons that the Federal Reserve is talking about rate cuts. The borrow-and-spend U.S. government can’t function in a high interest-rate environment.

The U.S. government spent $69.2 billion on interest expenses alone in January. This was more than the amount spent on national defense ($60 billion) and more than healthcare ($68 billion).

Interest on the federal debt came in $96 billion higher through the first four months of the fiscal year than in the same period last year. The government has shelled out $357 billion on interest payments in fiscal 2023. The only category with higher spending was Social Security.

Net interest expense, excluding intragovernmental transfers to trust funds, was $283 billion through the first four months of the fiscal year, still nearly as much as the government spent on national defense ($298 billion).

And interest expense will only continue to climb.

Much of the debt currently on the books was financed at very low rates before the Federal Reserve started its hiking cycle. Every month, some of that super-low-yielding paper matures and has to be replaced by bonds yielding much higher rates.

The weighted average interest rate on the government’s outstanding Treasury securities rose to 3.21 percent as of the end of January. That compares with a weighted average rate of 2.43 percent in January 2022.

Rising interest rates drove interest payments to over 35 percent as a percentage of total tax receipts in fiscal 2023. In other words, the government is already paying more than a third of the taxes it collects on interest expense.

And it's only going to get worse unless the Fed quickly ratchets down interest rates.

Interest expense will continue to rise at a rapid rate as more and more Treasuries mature and are replaced by higher-yielding bonds.

The only way out of this fiscal death spiral is significant spending cuts and/or major tax hikes.

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD advances toward 1.0750 on renewed US Dollar selling

EUR/USD advances toward 1.0750 on renewed US Dollar selling

EUR/USD is extending its mild recovery toward 1.0750 early Europe on Tuesday. Risk flows remain and exert additional downside pressure on the US Dollar while Euro traders reposition ahead of Sunday's French election. Mid-tier US data and Fedspeak stay in focus.


GBP/USD recovers to 1.2700 as US Dollar weakness extends

GBP/USD recovers to 1.2700 as US Dollar weakness extends

GBP/USD is recovering to test 1.2700 in the European morning on Tuesday. Extended US Dollar weakness due to improved market mood, aids the pair's latest uptick. Traders look to the US sentiment data and Fed speeches for further impetus, as the UK calendar remains data-quiet. 


Gold struggle extends above $2,300, with Fedspeak on tap

Gold struggle extends above $2,300, with Fedspeak on tap

Gold price is reversing a part of Monday’s rebound, as sellers fight back early Tuesday amid a risk-on market profile. The US Dollar nurses losses alongside the US Treasury bond yields, undermined by the dovish commentaries from Federal Reserve policymakers.

Gold News

Tron price primed for a surge after breaking descending trendline barrier

Tron price primed for a surge after breaking descending trendline barrier

Tron price has surged above and retested the descending trendline, indicating a bullish market structure. On-chain data reveals increasing activity among TRX active accounts, suggesting heightened blockchain usage that may fuel an impending rally in Tron’s price.

Read more

US Dollar offered, but intra-day momentum indicators are stretched

US Dollar offered, but intra-day momentum indicators are stretched

The Dollar Index reached its best level since May 1 before the weekend but has come back softer against all the G10 currencies and most emerging market currencies.

Read more