Budget deficit jumps 23% to $1.7T, raising concerns.
The U.S. Annual Budget Deficit Soars to $1.7 Trillion, Experts Warn of Addiction to Debt
The U.S. annual budget deficit has skyrocketed by 23 percent compared to last year, reaching just under $1.7 trillion. This alarming increase has led one fiscal policy expert to declare that “we are a nation addicted to debt.”
The Treasury Department’s final monthly treasury statement for the entire fiscal year 2023, which ended on Sept. 30, reveals that the budget deficit was $320 billion higher than the previous year, totaling $1.695 trillion.
The last time a higher budget gap was recorded was in 2021, when the deficit reached a record-breaking $2.78 trillion due to increased spending on pandemic relief.
Related Stories
Although the latest budget deficit is lower than the record-breaking gap in 2021, experts still consider it uncomfortably high and urge immediate action.
“We are a nation addicted to debt,” stated Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB). She emphasized that the actual borrowing amount is even higher, but accounting issues are causing it to be undercounted.
“The deficit totaled $1.7 trillion in Fiscal Year 2023, but we actually borrowed $2 trillion when you fix the accounting around President Biden’s reversed student debt cancellation plan,” MacGuineas explained. “That means borrowing doubled from last year. With the economy growing and unemployment near record lows, this was the time to instill fiscal responsibility and reduce our deficits.”
With interest payments on government debt reaching 15-year highs, MacGuineas warned that at this rate, ”we’ll spend more on interest than national defense by 2027.”
Yellen Blames Low Tax Receipts
Treasury Secretary Janet Yellen attributed the surge in the deficit to a drop in government revenues. She emphasized the importance of collecting more taxes and highlighted the Biden administration’s plans to increase tax collections to boost government funds.
“Falling revenues are a significant contributor to the 2023 deficit, underscoring the importance of President Biden’s enacted and proposed policies to reform the tax system,” stated Yellen, along with Office of Management and Budget Director Shalanda Young.
According to the Treasury data, federal tax receipts fell by 9.3 percent in 2023 compared to the previous year, primarily due to a $456 billion decline in individual income taxes. Additionally, lower Federal Reserve profits contributed to the decrease in government revenue by $106 billion, resulting from higher interest rates.
Despite these challenges, there was a partial offset with a $131 billion increase in social insurance and retirement receipts as wages rose.
The total federal borrowing from the public rose by $2 trillion during fiscal 2023, reaching $26.2 trillion. As a percentage of gross domestic product (GDP), borrowing from the public grew from 96 percent at the end of fiscal 2022 to 98 percent at the end of fiscal 2023.
Yellen acknowledged concerns about high deficits but assured that the Biden administration is taking action to address them.
“The Biden Administration continues to focus on navigating our economy’s transition to healthy and sustainable growth,” she stated. “As we do, the President and I are also committed to addressing challenges to our long-term fiscal outlook.”
A crucial part of the administration’s strategy to tackle deficits in the long term is collecting more taxes from wealthier Americans and corporations, according to Yellen.
National Debt Pushes Higher
Since the beginning of October, the national debt has sharply increased. The latest Treasury data reveals that as of Oct. 18, the total outstanding public debt reached $33.63 trillion, which is approximately $500 billion higher than the previous month.
At one point in October, the national debt surged by $275 billion in a single day.
According to the 2024 White House budget, the national debt is projected to exceed $43 trillion by 2033.
Currently, the debt-to-GDP ratio stands at around 100 percent.
A recent report from the Penn Wharton Budget Model warns that the United States has only about 20 years to address its fiscal challenges. After that, no amount of tax increases or spending cuts would prevent a government default on its debt, leading to severe consequences for the U.S. and global economies.
The report emphasizes that the 20-year timeframe assumes that market participants believe corrective actions will be taken in advance. If this belief wavers, the window for corrective action becomes even shorter, making the situation more precarious.
How does the rising budget deficit impact interest payments on government debt and what are the potential consequences?
The U.S. annual budget deficit has reached an alarming level, soaring to $1.7 trillion, which is a 23 percent increase compared to last year. This significant increase has led experts to warn about the nation’s addiction to debt.
According to the Treasury Department’s final monthly treasury statement for the fiscal year 2023, the budget deficit was $320 billion higher than the previous year, totaling $1.695 trillion. The last time such a high budget gap was recorded was in 2021, when the deficit reached a record-breaking $2.78 trillion due to increased spending on pandemic relief.
Although the current budget deficit is lower than the record-breaking gap in 2021, experts still consider it uncomfortably high and are urging immediate action. Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), stated, “We are a nation addicted to debt.” She also emphasized that the actual borrowing amount is even higher, but accounting issues are causing it to be undercounted.
MacGuineas explained that the deficit totaled $1.7 trillion in Fiscal Year 2023, but the actual borrowing reached $2 trillion when accounting for President Biden’s reversed student debt cancellation plan. This means that borrowing has doubled from last year. MacGuineas stressed the importance of fiscal responsibility and deficit reduction, especially at a time when the economy is growing and unemployment is low.
One of the consequences of the rising budget deficit is the increase in interest payments on government debt, which have reached 15-year highs. MacGuineas warned that if this trend continues, the U.S. will spend more on interest than on national defense by 2027.
Treasury Secretary Janet Yellen attributed the surge in the deficit to a drop in government revenues. She emphasized the importance of collecting more taxes and highlighted the Biden administration’s plans to increase tax collections in order to boost government funds. Yellen stated that falling revenues are a significant contributor to the deficit and underscored the importance of President Biden’s enacted and proposed policies to reform the tax system.
According to Treasury data, federal tax receipts fell by 9.3 percent in 2023 compared to the previous year, primarily due to a decline in individual income taxes. Lower Federal Reserve profits also contributed to the decrease in government revenue. However, there was a partial offset with an increase in social insurance and retirement receipts as wages rose.
" Conservative News Daily does not always share or support the views and opinions expressed here; they are just those of the writer."
