The latest report from the US Treasury Department has revealed that Washington’s federal budget deficit doubled in the government’s latest fiscal year. Despite a decline in tax revenue, President Joe Biden’s administration continued to increase spending, resulting in a deficit of $1.7 trillion in the 2023 fiscal year, compared to $1.37 trillion in the previous 12 months. However, these figures were somewhat skewed by Biden’s unsuccessful attempt to cancel student loan debts, making the deficit appear larger than it actually was and underestimating the total for 2023.
When excluding hypothetical costs and gains from the loan program, which was blocked by the US Supreme Court, the deficit actually increased to about $2 trillion in fiscal 2023 from less than $1 trillion in the previous year. This adds to the concern as federal spending has exceeded tax revenue for more than 20 consecutive years, leading to a ballooning US government debt that now stands at $33.6 trillion, an increase of nearly $6 trillion since Biden took office in January 2021.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, referred to the nation as “addicted to debt,” emphasizing that this should have been a time to instill fiscal responsibility and reduce deficits, especially as the economy was growing and unemployment reached historic lows. However, instead of addressing the mounting debt, the US now faces the prospect of paying more to finance the existing debt, let alone the trillions of dollars projected to be borrowed over the coming decade.
The report also highlights the rising cost of servicing the federal government’s debt, which is expected to exceed the nation’s defense budget by next year. According to the Tax Foundation, a nonpartisan policy group, net interest costs surged to $659 billion in fiscal 2023, a 39% increase from the previous year, while defense spending only rose by 7%, reaching $775.9 billion.
Furthermore, US tax receipts experienced a decline of 9.3% in the latest fiscal year, totaling $4.4 trillion. This drop was partly due to a sharp increase in spending on entitlement programs, as the government boosted Social Security payouts following a surge in the US inflation rate, which reached a 40-year high. Social Security payments rose by 11%, reaching $1.3 trillion, while Medicare costs increased by 18% to $846 billion, and Medicaid payments rose by 4% to $616 billion.
These deficit figures arise at a time when President Biden is pushing for more funding from Congress to support Ukraine in its conflict with Russia. The White House recently requested approval for $106 billion in emergency spending, with a significant portion allocated for Ukraine and Israel. However, House Republicans have been pushing back against prolonging the conflict, and this has led to some political upheaval, including the ousting of House Speaker Kevin McCarthy from his leadership position.
Despite the rising US government debt, Treasury Secretary Janet Yellen downplayed concerns and emphasized that Biden’s plan to reduce future deficits revolves around requiring wealthy individuals to pay more taxes. Yellen also dismissed the notion that Washington couldn’t afford to deal with the Ukraine crisis and the Israel-Hamas war simultaneously, stating that America can certainly stand with Israel and support Ukraine in its struggle against Russia.
The increasing federal budget deficit and mounting US government debt underscore the challenges faced by the Biden administration and the need to address fiscal responsibility. As the country continues to grapple with economic recovery and international conflicts, finding a balance between necessary spending and reducing deficits will be crucial in the coming years.