Deficit Spending Keeping The Economy Out Of Recession

Economic growth continues to defy expectations of a slowdown and recession due to continued increases in deficit spending. In fact, the U.S. Treasury recently reported the December budget deficit, which shows the U.S. collected $429 billion through various taxes while total outlays hit $559 billion.

outlays by function

As noted, the problem remains on how the economy has avoided a recession despite the Fed’s aggressive rate hiking campaign. Numerous indicators, from the leading economic index to the yield curve, suggest a high probability of an economic recession, but one has yet to occur. One explanation for this has been the surge in Federal expenditures since the end of 2022 stemming from the Inflation Reduction and CHIPs Acts. The second reason is that GDP was so grossly elevated from the $5 Trillion in previous fiscal policies that the lag effect is taking longer than historical norms to resolve.

federal receipts