U.S. Borrows 53.7 Cents Of Every Dollar Spent In March

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 |  Includes: AGG, BND, BNDS, SCHZ, TIP
by: Kirk Lindstrom

In March 2012, the U.S. Government ran a budget deficit $198B, the Treasury Department reported. This is up $10.0 billion or 5.3% from the $188.154 billion deficit in March 2011.

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The total budget deficit for the first six months of fiscal 2012 reached $778,988 billion.

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Summary of two charts:

Year

2012 2011
Receipts $171.2B $150.9B
Outlays $369.4B $339.0B
Deficit $198.2B $188.2B
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Deficit (amount borrowed) as a percentage of spending = 53.7%

The Bond market took the news in stride with mixed results:

Name Price Change Yield
AGG iShares Barclays Aggregate Bond 110.13 Up 0.01 3.54
BND Vanguard Total Bond Market ETF 83.49 Down 0.12 3.51
LAG SPDR Barclays Capital Aggregate Bond 58.01 Down 0.03 3.16
SCHZ Schwab U.S. Aggregate Bond ETF 51.65 Up 0.01 -
TIP iShares Barclays TIPS Bond 118.79 Up 0.19 2.48
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Sometimes I think these deficit numbers are too large for people to comprehend, so I will divide them by 100 million to put them in perspective.

Lets say your kid graduated from college and their monthly pay check after taxes is $1,712 and their living expenses "worthy of someone of his education and status" total $3,694 a month. Would you tell the kid to:

  • Not worry. Keep charging everything on credit cards and let your grandkids pay the bills someday. (This is what we currently do in the U.S. with our national debt.)
  • Demand your boss give you a raise to match your education and status. (This is what people do when they say they want to raise taxes.)
  • Cut spending. (Nobody wants to do this. We're not Greece!)

I'd suggest the kid cut spending and work harder so the boss will give them a raise so they can someday afford what they want. Hopefully the U.S. government can reach a compromise that both cuts spending and raises revenue without killing the economic recovery.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I am long individual TIPS, as I think the US will continue to print money to kick the can down the road hoping to inflate away the problem.