10/26/23 08:46 AM EDT

Reduced Tax Revenue Doesn't Mean Reduced Gov. Spending

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Danielle DiMartino Booth deserves commendation for her highly accurate insights on interest rates over the past two years, alongside her emphasis on the risks posed by the Federal Government's wartime-level expenditures. Today's extended timeline chart underscores this very point. Since 2010, we've observed a steep incline in the curve, indicating a swift surge in debt relative to GDP. Come 2023, the ratio closely mirrors that of the late 1940s. In the 1940s, the U.S. industriously produced Stuart and Locust tanks as fast as working hands could build them. Fast forward to 2023, $828 billion is allocated to Medicare, ensuring medical coverage for the descendants of those M3 Stuart builders.

For 2023, the deficit exceeds a trillion dollars. The Russell 2000 is a microcosm to epitomize the ramifications of debt-induced expenditure. All sails smoothly until revenue dwindles, leading to awkward conversations. About those 2023 tax revenues, individual tax collections have nosedived by $456 billion. California's tax revenues have dipped by over $100 billion, a tentative figure given the continual deadline extensions. Federal remittances have decreased by $106 billion. One might assume such reduced revenues instigate judicious cutbacks in spending. Regrettably, that's not the case. Social Security expenditures have climbed by $134 billion compared to the previous year. Defense allocations have risen by $50 billion, while the net interest on debt has surged almost $200 billion from last year's figures.

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