US Budget Deficit Soars to $1.7 Trillion in Fiscal Year 2023
The US budget deficit for fiscal year 2023 has reached a staggering $1.7 trillion, according to data released by the Treasury Department. This represents a significant increase of $320 billion, or 23%, from the previous fiscal year.
However, if we exclude the impact of President Joe Biden’s federal student debt cancellation plan, which was struck down by the Supreme Court, the deficit essentially doubles to around $2 trillion. The Treasury Department had initially listed the deficit for fiscal year 2022 as $1.4 trillion, taking into account the cost of the president’s proposal. Without it, the deficit would have been closer to $1 trillion.
The overturning of the cancellation plan was considered a savings for fiscal year 2023, reducing the size of the deficit to $1.7 trillion. This massive deficit has raised concerns about the nation’s growing debt and the implications it will have in the coming years.
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, expressed her concerns over the nation’s addiction to debt. She believes that with a growing economy and low unemployment at the time, it was crucial to instill fiscal responsibility and reduce deficits.
The nation’s hefty debt load will become even costlier in the future as interest payments rise. Michael Peterson, CEO of the Peter G. Peterson Foundation, highlighted the painful combination of rising debt, inflation, and interest costs. He stated that interest costs rose almost 40% last year, and soon the US will spend more on interest than on national defense.
Lower tax revenues have also contributed significantly to the growth in the budget deficit. Bernard Yaros, lead US economist for Oxford Economics, revealed that more than 40% of the deficit’s increase can be attributed to lower tax revenues. The weak stock market in 2022 resulted in lower capital gains, and the Internal Revenue Service extended tax deadlines for certain regions due to natural disasters.
Additionally, increased spending on entitlement programs such as Social Security, Medicare, and Medicaid accounted for over a quarter of the widening budget shortfall. The growing number of Social Security beneficiaries and the 8.7% cost-of-living adjustment for 2023 contributed to the rise in expenditures.
The annual deficit data is expected to complicate Congress’ efforts to reach a federal spending deal before government funding runs out next month. Lawmakers have already passed a stopgap spending measure to extend federal funding until November 17.
The soaring budget deficit highlights the pressing need for the government to address the nation’s long-term fiscal challenges and find ways to reduce deficits while ensuring economic growth and stability.