“What in the hell were they thinking” will surely be the query of future historians when they survey the US fiscal wreckage of the present era.
We were prompted to address the fiscal madness now erupting on the banks of the Potomac by yesterday’s announcement that the October budget deficit came in 34% higher than last year at $234.5 billion. That brought the LTM (latest 12 months) red ink total above the trillion dollar mark for the first time since 2013.
As always, we begin with the crucial point that when it comes to budget deficits its not just about the size, but also the location in cyclical time and the trends in motion for future years. And this one is an unprecedented doozy on all three counts.
The cyclical dimension is self-evident. When you borrow $1.018 trillion at the tippy top of the longest business expansion in history—that’s an altogether different kettle of fish than the $1.4 trillion deficit recorded at the bottom of the Great Recession in FY 2009.