US budget gap soars to $1.7 trillion, largest outside COVID era

  23 October 2023    Read: 384
US budget gap soars to $1.7 trillion, largest outside COVID era

The U.S. government on Friday posted a $1.695 trillion budget deficit in fiscal 2023, a 23% jump from the prior year as revenues fell and outlays for Social Security, Medicare and record-high interest costs on the federal debt rose, reports citing Reuters.

The Treasury Department said the deficit was the largest since a COVID-fueled $2.78 trillion gap in 2021. It marks a major return to ballooning deficits after back-to-back declines during President Joe Biden's first two years in office.

The deficit comes as Biden is asking Congress for $100 billion in new foreign aid and security spending, including $60 billion for Ukraine and $14 billion for Israel, along with funding for U.S. border security and the Indo-Pacific region.

The big deficit, which exceeded all pre-COVID deficits, including those brought about by Republican tax cuts passed under Donald Trump and from the financial crisis years, is likely to enflame Biden's fiscal battles with Republicans in the House of Representatives, whose demands for spending cuts pushed the U.S. to the brink of default in early June over the debt ceiling.

A deal to avoid a government shutdown over deeper spending cut demands from Republican hardliners led to the ouster of U.S. House of Representatives Speaker Kevin McCarthy, and the party is still divided over who should lead them, which is expected to make negotiations ahead of a new fiscal deadline in mid-November more difficult.

For September, the final month of the fiscal year, the deficit fell to $171 billion from $430 billion in September 2022.

"Falling revenues are a significant contributor to the 2023 deficit, underscoring the importance of President Biden's enacted and proposed policies to reform the tax system," Treasury Secretary Janet Yellen and Office of Management and Budget Director Shalanda Young said in a joint statement.

The fiscal 2023 deficit would have been $321 billion larger, but was reduced by this amount because the Supreme Court struck down Biden's student loan forgiveness program as unconstitutional. The ruling forced the Treasury to reverse a pre-emptive charge against fiscal 2022 budget results that increased that year's deficit.

The fiscal year 2022 deficit was $1.375 trillion.

Taking into account the two one-off adjustments, last fiscal year's deficit would have been closer to $1 trillion and this year's closer to $2 trillion, a Treasury official said.

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