The federal deficit has reached $1.7 trillion for the fiscal year 2023, according to the Treasury Department. The blame for this deficit is being placed on the 2017 tax cut package passed by President Biden’s predecessor.
However, the deficit could have been even worse at $2 trillion if the Supreme Court hadn’t overturned Mr. Biden’s student loan forgiveness program. This cancellation of student loan debt was counted as a savings of over $300 billion.
In terms of revenue, the government collected $4.439 trillion but spent $6.134 trillion, resulting in a final deficit of $1.695 trillion. This is the third highest deficit in history, only trailing the deficits of $3.1 trillion and $2.8 trillion in the first two years of the coronavirus pandemic.
Both spending and revenue have been problematic. If not for the student loan situation, spending would have increased by approximately $200 billion. Surprisingly, there has also been a drop in revenue, with the government taking in about $450 billion less than the previous year.
Treasury Secretary Janet Yellen and White House budget director Shalanda D. Young attribute the drop in revenue to the passage of the Tax Cuts and Jobs Act of 2017. They state that this decrease in revenue was the main driver of the increase in the deficit as a share of GDP, while non-interest spending did not significantly contribute to the increase. They are urging Congress to raise taxes to address the deficit.
Despite the grim fiscal picture, President Biden’s economic plan aims to build an economy that benefits the middle class.
The Defense Department’s spending increased by approximately $50 billion last year, reaching over $775 billion. Other departments, such as the Labor Department and Housing and Urban Development, also experienced significant changes.
Interest payments on the national debt saw the largest line-item increase, rising from $747.6 billion to $879.3 billion. Additionally, Social Security spending remains the highest line item in the budget, at $1.416 trillion.
Budget analysts are concerned about the fiscal situation in 2023, as the winding down of pandemic spending and a strong economy should have led to a reduction in the deficit. However, the deficit has doubled from 2022 to 2023, even after accounting for the student loan situation.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, warns of rising debt, inflation, and interest costs, which will lead to even more debt. He believes that Congress needs to address this issue seriously.
The Biden administration claims that progress has already been made, citing the debt deal reached with then-House Speaker Kevin McCarthy, which is projected to lower deficits by $1 trillion over the next decade. However, President Biden is proposing $105 billion in emergency spending without suggesting offsetting cuts to pay for it.
