For the 12 fiscal months ending September 30, the federal budget deficit actually doubled from 2022 – The Federalist.
Many headlines reported that the federal government’s deficit last fiscal year was just $1.7 trillion, suggesting a deliberate understatement of the real numbers.
The accounting problem stems in part from the government’s provision of benefits in the form of “student loan forgiveness” proposed by President Biden last year. The Supreme Court struck down the programme as unconstitutional in June, but the government recorded $321 billion in “savings” on its balance sheets because the Biden administration could not spend the money.
From an accounting perspective, the deficit was roughly $1.4 trillion in 2022 and a deficit of $1.7 trillion this year. However, if you take into account the $321 billion “spent” on Biden’s “loan forgiveness” plan and the $321 billion “saved” by the Supreme Court during the cancellation of that plan, the federal government actually had a $1 deficit in 2022 that jumped to $2 trillion in FY 2023.
The Treasury Department saw a drop in revenue between 2022 and 2023, which was taken by the Biden administration as a sign for Congress to raise taxes to reduce the deficit.
The revenue spike in 2022 was caused by the Federal Reserve’s decision to print money during the Covid pandemic, which created bubbles in all kinds of asset classes, from the stock market to cryptocurrencies. As a result, people paying capital gains taxes while selling artificially inflated stocks provided an influx of funds to the Treasury.
However, money printing by the Federal Reserve and excessive spending by Congress fuelled inflation, exacerbating the deficit problem.
The Treasury admits that, excluding “student loans,” non-interest spending rose from 21.4 percent of the economy in fiscal 2022 to 21.6 percent of GDP in fiscal 2023. The inflation-driven increase in spending portends serious problems as the deficit rose from 5.4 per cent of the economy’s GDP in 2022 to 6.3 per cent of GDP in 2023.
Washington is approaching a point where interest costs will become one of the largest elements of the federal budget, meaning that the taxes of the younger American generation will go elsewhere in the country rather than paying the bills for their ancestors.
Unless the government takes significant action to manage the budget deficit, it is likely that future generations, if not the current one, will face a tremendous financial crisis.
