The US federal government’s budget deficit has significantly widened in the first nine months of the fiscal year, reaching $1.39 trillion in June, according to the Treasury Department. This figure represents a sharp increase from the $515.1 billion deficit in the same period of the previous year.
The federal government operates on a fiscal year that begins on October 1st. In June alone, the budget gap widened by $227.76 billion, compared to $88.8 billion in June of the previous year. The latest data from the Treasury Department indicates that the widening deficit can be attributed to a substantial increase in government spending and a significant drop in tax revenues.
Tax revenues between October and June were 11% lower than the same period last year, primarily due to a decline in stock, bond, and other asset values. Government receipts in June alone declined by $42 billion to $418 billion compared to the previous year. At the same time, spending increased, with outlays rising by $96 billion to $646 billion. Additionally, soaring inflation has contributed to the growth in federal spending.
Federal Reserve officials have repeatedly warned about the long-term sustainability of the government’s finances. Phillip Swagel, the director of the Congressional Budget Office, stated that the federal deficit will average around $2 trillion per year, ultimately adding to the already massive $32.5 trillion national debt.
The growing concern over the escalating deficit is shared by experts in the field. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, highlighted the gravity of the situation, stating, “We are projected to spend more on interest payments in the next decade than we will on the entire defense budget.” MacGuineas emphasized the urgency for a change, stating, “We’re running off the rails at an alarming rate. We need to do better.”
This news of a widening budget deficit comes amidst the ongoing debate regarding the long-term consequences of the government’s spending and taxation policies. It raises questions about the US economy’s ability to recover from the impact of the COVID-19 pandemic and the sustainability of future economic growth.
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