Task Force KleptoCapture A substantial drop in tax income, along with higher expenditures on social security and Medicare, unprecedented government spending on COVID-19 pandemic relief programmes, and an uptick in interest rates leading to increased borrowing costs, have all contributed to the significant expansion of budget deficit estimates.
Concerns Mount Over 2024 US Presidential Debates as Budget Deficit Soars
As the 2024 US presidential debates continue to gain traction, the primary concern among American voters revolves around the escalating budget deficit. The deficit currently stands at an astonishing $2 trillion, nearly double the figure from the previous year. This substantial increase in the budget deficit can be attributed to several factors, including a sharp decline in tax revenues, increased spending on programs such as social security and Medicare, significant governmental expenditures related to COVID-19 pandemic relief, and a rise in interest rates, leading to elevated borrowing costs.
Financing the Deficit: The Challenge Ahead
As of September 30, 2022, the conclusion of the most recent fiscal year, the United States Treasury faced a daunting task in managing its finances. To cover the budget deficit, the federal government resorted to borrowing funds through the sale of various financial instruments, including Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS).
At that point, the outstanding debt had reached an astonishing $24 trillion, equivalent to about 93 percent of the country’s GDP. This marked the highest debt-to-GDP ratio since the conclusion of World War II. Adding to the complexity, a significant portion of this debt was set to mature within the next three years.
Now, in fiscal year 2023–24, nearly thirty percent of the $6.7 trillion of outstanding debt is coming due and will require refinancing. This presents a considerable challenge, particularly given the elevated levels of debt. Attempting to finance the budget deficit in the face of prevailing high-interest rates could exacerbate the deficit further. Given this precarious situation, there are no readily apparent solutions for navigating this tightrope without considering options such as raising taxes, lowering interest rates, or reducing expenditures.
Defence expenditure, and price gouging
Conversations about reducing government spending inevitably shift towards the defence sector, which is a significant portion of discretionary spending. Recently, President Joe Biden approved the Fiscal 2023 National Defense Authorization Act, allocating $816.7 billion to the Department of Defence.
This budget includes an additional $500 million beyond the initial request and underscores the United States’ commitment to NATO obligations, the maintenance of military bases in 85 countries and territories, and a unified response to Russia’s unprovoked war in Ukraine. While the emergence of China and an assertive Russia heightens strategic concerns, the country’s budget deficit nearing $1 trillion and publicly held debt equivalent to the size of the U.S. GDP also raise national security worries.
There is bipartisan support for maintaining a stable defense budget to honour America’s NATO commitments and sustain the global balance of power. Nevertheless, there are significant concerns regarding defence procurement.
Following a six-month investigation, CBS News‘ 60 Minutes program found that nearly half of the defense budget flows to defense contractors such as Lockheed Martin, Boeing, Raytheon, and TransDigm, which are earning profits of up to 40%. There is also substantial apprehension about military contractors overcharging or engaging in “price gouging” with the Pentagon. The Department of Defense’s (DOD) acquisitions were discovered to be affected by a supply chain characterised by unreasonably high-profit margins.
CBS News attributes the origin of this problem to 1993, when the Pentagon, in an effort to reduce costs, encouraged defence companies to merge, consolidating 51 major contractors into five giants. This consolidation diminished the government’s bargaining power. Furthermore, in the 2000s, around 130,000 jobs responsible for overseeing government contracts were eliminated, exacerbating the issue.
In most U.S. states, “price gouging,” or significantly raising prices of goods or services beyond reasonable or fair levels, is considered a violation of unfair or deceptive trade practices laws. The “Stop Price Gouging the Military Act,” introduced in the Senate on September 6, 2022, seeks to modify DOD acquisition and negotiation processes to enhance transparency and pricing. It includes requirements for defense contractors to make annual disclosures about average prices and gross margins.
Watchdog organizations have also flagged another concern, which may be prevalent in India as well—the “revolving door” practice of DOD acquisition officials transitioning to roles in defense contracting companies. The Government Accountability Office (GAO) discovered that 1,700 officials left the DOD to work for defence contractors.
DOJ’s Task Force KleptoCapture
The Justice Department established Task Force KleptoCapture with the mission of investigating Russian oligarchs and their assets, such as aeroplanes, luxury boats, and real estate properties. The task force achieved early successes, leading to significant arrests and charges for money laundering. They successfully confiscated the $325 million superyacht Amadea in Fiji, which belonged to Suleiman Kerimov, and the $90 million yacht Tango, owned by Viktor Vekselberg, on the Spanish island of Mallorca. Prosecutors are now focusing on the accountants and lawyers who facilitated Russian payments, managed properties, or assisted in acquiring sensitive technologies with potential military applications.
Since the Ukraine invasion in February 2022, the United States has received strong support for enforcing its sanctions in the European Union, the United Kingdom, and other jurisdictions. This sends a clear message to Russia’s elite that supporting Kremlin aggression comes with severe consequences.
Of Yachts, Jets and ‘Doxxing’
Continuing in the realm of luxury assets such as jets and yachts, Section 179 of the US Internal Revenue Code allows you to claim a one-time deduction in the year you purchase your yacht, which can be as much as the yacht’s purchase price, with a maximum deduction limit of $500,000. Similarly, if you’re using a new or used jet for business purposes, you can write off the entire cost in the first year, essentially making the aircraft appear as if it was obtained at no cost.
This explains why many entrepreneurs opt to acquire jets. However, thanks to tools like Google Flight Tracker and websites like FlightAware, FlightRadar24, and FlightStats, tracking jets has become a well-liked pastime. This newfound interest also comes with risks.
Elon Musk, who now goes by “X” on Twitter, has implemented a strict policy against disclosing his jet’s “exact real-time” location, which he likens to revealing “assassination coordinates.” Some journalists have faced suspensions for violating this policy. Beyond this issue, using artificial intelligence to track private jets presents a significant risk factor. It’s worth recalling the case of Yevgeny Prigozhin, who allegedly led a failed coup against Russian President Vladimir Putin and reportedly met his demise in a plane crash.
Jewish New Year’s ‘Rosh Hashanah’ celebrations
According to a recent study, around 5.8 million adults in the United States, which accounts for approximately 2.4% of all adults in the country, identify as Jewish. The Jewish community has made significant contributions across various fields of American accomplishment. On the evening of Friday, September 15, 2023, the Jewish New Year celebration known as “Rosh Hashanah” began, and it will continue for ten days until Yom Kippur. It’s a joyful holiday, so be sure to extend your wishes for a “Happy New Year” or “Shanah Tovah,” which translates to “Good Year,” to your friends celebrating this occasion.
