The federal deficit for the fiscal year 2023 has soared to $1.7 trillion, according to the Treasury Department. President Biden’s administration has attributed the blame to his predecessor’s 2017 tax cut package. The deficit could have been even worse, reaching $2 trillion, if the Supreme Court had not overturned Biden’s student loan forgiveness program, which saved over $300 billion. The government’s revenue was $4.439 trillion, while spending amounted to $6.134 trillion, resulting in the final deficit of $1.695 trillion. This figure ranks as the third worst deficit in history, behind the deficits incurred during the first two years of the pandemic.
Both spending and revenue sides of the budget have experienced setbacks. Without the student loan situation, spending would have risen by approximately $200 billion. A significant surprise was the drop in revenue, with the government collecting $450 billion less than the previous year. Budget analysts, including Treasury Secretary Janet Yellen and White House budget director Shalanda D. Young, attribute this revenue decrease to the Tax Cuts and Jobs Act of 2017 and urge Congress to raise taxes to address the deficit.
The Defense Department spent over $775 billion in the fiscal year 2023, about $50 billion more than the previous year. Other departments, such as the Labor Department and Housing and Urban Development, also saw significant changes in spending. The largest increase in budget expenditure was in interest payments on the national debt, which rose to $879.3 billion from $747.6 billion in the previous year. Social Security spending remains the most significant line item, totaling $1.416 trillion in the budget.
The grim fiscal picture for 2023 is worrying given the winding down of pandemic spending and the relatively strong economy. Budget analysts express concern that the deficit should have decreased but instead doubled from 2022 to 2023 once the student loan situation is factored in. Rising debt, inflation, and interest costs have led to a vicious cycle of mounting debt. Interest costs rose nearly 40% last year, and soon the U.S. will spend more on interest payments than on national defense.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, stressed the need for Congress to address the issue seriously. The Biden administration claims that progress has already been made on the deficit, pointing to a debt deal reached with former House Speaker Kevin McCarthy that is projected to lower deficits by $1 trillion over the next decade. However, President Biden intends to tap into those savings.