US Budget Gap Soars to $1.7T
Facts
- On Friday, the US Treasury Department announced the federal government posted a $1.695T budget deficit in fiscal year 2023. The fiscal year 2022 deficit was $1.375T.1
- The budget shortfall is equal to 6.3% of gross domestic product (GDP) — the third-largest on record. Last year, the budget gap stood at 5.4% of GDP.2
- In September, the last month of the fiscal year, the deficit — the largest since the pandemic stoked a $2.78T gap in 2021 — fell to $171B compared to $430B in September 2022.3
- The US government posted a 23% jump from the prior year as revenues fell $457B, expenses reduced by $137B, and outlays totaled $6.134T.4
- The deficit adds to the US national debt — which topped $33T this year — with net interest on the debt increasing to a record $659B in 2023 from $475B last year.5
- The budget report comes as Pres. Joe Biden seeks $100B from Congress in new foreign aid for Ukraine and Israel and security spending for the US border and the Indo-Pacific region.6
Sources: 1Reuters, 2Bloomberg, 3New York Post, 4CNBC, 5The New York Times and 6The Washington Times.
Narratives
- Republican narrative, as provided by Washington Examiner. Deficit-trimming measures, including deep budget cuts and curbing spending on social safety net programs, are crucial to reducing the federal deficit and preventing a government shutdown next month. The current borrowing path is unsustainable, especially if interest rates stay high for an extended period.
- Democratic narrative, as provided by The New York Times. There's no need to panic. Leaving aside the student loan effects, the surge in budget deficit isn't because of a rise in spending but due to a steep fall in revenues. It's not a spending problem but a revenue problem — thanks to Republican tax cuts and decades of trickle-down economics.