Biden requests support for Israel and Ukraine
The U.S. government on Friday posted a budget deficit of $1.695 trillion in fiscal year 2023, up 23% from the previous year with lower revenues, higher expenditures on Social Security and Medicare and higher interest costs on the federal debt.
The Treasury Department said the deficit is the largest since the $2.78 trillion COVID-19-fueled gap in 2021. This represents a significant return to a ballooning deficit after successive declines during President Joe Biden's first two years in office.
US budget deficit
The deficit comes at a time when Biden is asking Congress for $100 billion in new foreign aid and security spending, including $60 billion for Ukraine and $14 billion for Israel, along with funding for US border security and the Indo-Pacific region.
The large deficit, which exceeds all cases before “Covid-19”, including those resulting from the tax cuts approved by Republicans under Donald Trump and from the years of the financial crisis, is likely to fuel Biden’s financial crisis with Republicans in the House of Representatives, where Their spending demands brought the government to the brink of default in early June amid debt ceiling negotiations.
Avoid a government shutdown
A deal to avoid a government shutdown over hardline Republican demands for spending cuts has ousted US House Speaker Kevin McCarthy, and the party remains divided over who should lead them, who is expected to hold negotiations before mid-November.
In September, the last month of the fiscal year, the deficit fell to $171 billion from $430 billion in September 2022.
The 2023 fiscal deficit would have been $321 billion larger, but was reduced by that amount because the Supreme Court struck down Biden's student loan forgiveness program as unconstitutional. The ruling forced the Treasury Department to cancel pre-emptive charges against fiscal year 2022 budget results that increased the deficit that year.
Fiscal deficit in 2022
The deficit in fiscal year 2022 reached $1.375 trillion.
Taking into account the two one-time adjustments, the deficit last fiscal year would have been closer to $1 trillion and this year is closer to $2 trillion, a Treasury official said.
The 2023 deficit marks the end of two years of declining deficits for Biden as coronavirus spending fades. The US deficit peaked in fiscal year 2020 at $3.13 trillion, as the sharp decline since the 1930s severely constrained tax revenues while spending on unemployment benefits, direct payments to consumers and business aid peaked.
But the Congressional Budget Office warned that based on current tax and spending legislation, the US deficit will approach Covid levels by the end of the decade, reaching about $2.13 trillion in 2030 as interest, health and pension costs rise.
2023 revenues
For fiscal year 2023, total revenues fell by $457 billion, or 9% from fiscal year 2022, to $4.439 trillion, largely due to lower non-withholding individual income tax payments amid worse performance in stocks and other financial assets as prices rose. Benefit.
Other declines in revenue included a $106 billion decline in Federal Reserve earnings, as interest paid on banks' reserves ate up any income for the portfolio.
Fiscal expenditures for 2023 decreased by $137 billion, or 2% from the previous year, to $6.134 trillion. Expenditures would have been more modest were it not for the significant increases in spending on retirement benefits, health care for the elderly, and in debt servicing costs.
Social Security spending rose 10% to $1.416 trillion due to cost-of-living adjustments for inflation, and spending on the Medicare program for seniors rose 4% to $1.022 trillion.
Interest costs
Interest costs on more than $33 trillion in federal debt also rose sharply, up 23% to $879 billion, a record high. Net interest payments, excluding government transfers to trust funds, rose 39% to $659 billion, also a record, according to a Treasury Department official.
Total interest payments reached 3.28% as a share of GDP, the highest level since 2001, and the net share of 2.45% was the highest since 1998, the official said.
Interest rates have risen over the past year and a half as the Federal Reserve has raised borrowing costs to slow inflation. The average interest cost on outstanding Treasury debt was 2.97% in the last fiscal year, up from 2.07% the previous year.