UPDATED: On the second day since the Republicans raised the debt ceiling, the federal government added another 43 billion to the previous day’s $355 billion increase. The $43 billion in itself is a very large increase, and this brings the new two-day deficit total to a remarkably $409.95 billion. That’s a debt that’s nearly the size of half the Medicaid budget, all racked up in two days.
Original post:
According to the latest daily report from the US Treasury, the total public debt outstanding at the Treasury jumped 355.4 billion in a single day on Monday. That’s the largest jump in a single day in history, and brings the total debt above $36.5 trillion, up from 34.8 trillion a year earlier.
The enormous surge in the national debt comes as Congress and President Trump approved the latest omnibus spending bill which included an increase to the debt limit of $5 trillion. (That’s the largest increase to the debt limit ever.)
Although the federal government had been running large deficits under the previous debt limit, the Treasury had been using a variety of budget tricks to borrow funds from various Federal accounts in order to keep spending while not exceeding the debt limit. Thanks to the increase in the debt limit, the Treasury can now issue new debt, pay off its internal debts, and get back to running up the official debt total. In part, the surge in debt is to ensure the Treasury is flush with cash.
Bloomberg provides some additional details:
The department announced Tuesday that it expects to boost its cash pile in the Treasury General Account to around $500 billion by the end of July, up from ... roughly $313 billion as of July 3, which was before President Donald Trump signed the budget bill that included a $5 trillion increase in the debt ceiling. The Treasury’s bank account had been under downward pressure because of measures to avoid breaching the $36.1 trillion debt cap.
The forecast, which includes ending the cash management bill series while increasing benchmark bill auctions, suggests that the Treasury is taking a measured approach to rebuilding its cash balance while leaving room to issue debt to fund the deficit, according to Deutsche Bank strategist Steven Zeng.
Naturally, the Treasury can’t use the entirety of new debt to replenish its cash balance because hundreds of billions of dollars are being spent monthly to fund the welfare-warfare state.
As we noted here at Power& Market yesterday, the federal government is on track for a $2 trillion deficit this fiscal year, making it the biggest year for new debt since 2021.
