The federal budget deficit has doubled to $2 trillion under President Biden in just a year, significantly impacting the economy and the financial well-being of Americans.
Official and Unofficial Numbers
Treasury Secretary Janet Yellen announced a deficit of $1.7 trillion for fiscal 2023. However, $300 billion in student debt cancellations makes the actual deficit $2 trillion.
Previous Fiscal Year Comparison
Last year’s budget deficit, adjusted for the same student debt factors, was less than $1 trillion, showing an alarming rise in a single year.
Unprecedented Increase
Remarkably, this doubling occurred without a recession or war to explain the fiscal surge.
Role of Inflationary Spending
A large part of this increase is due to inflationary spending by the federal government.
The Burden of National Debt
The size of the U.S. national debt is now as big as the country’s annual economic output, known as GDP.
The Cost to Taxpayers
While inflation erodes the buying power of average Americans, the wealthiest generation is benefiting from federal spending.
Social Security, Medicare, and Medicaid
These three extensive entitlement programs saw increases in spending by 11%, 12%, and 4%, respectively.
Federal Reserve’s Counteraction
The Federal Reserve raised interest rates to more than 5% to combat inflation, decreasing it to about 4% from near double digits.
Ongoing Federal Reserve Challenges
This 4% inflation rate is still double the Federal Reserve’s target, indicating more work is needed to stabilize the economy.
Increased Debt Payments
The government had to pay $184 billion more in interest on the debt compared to last year due to the rate hikes.
Banks Caught Unprepared
An additional $101 billion was paid to depositors at banks like Silicon Valley Bank and First Republic, which didn’t plan for rate hikes.
Shrinking Federal Revenue
The deficit ballooned partly because of a decline in federal revenue, which was down mainly due to higher interest rates.
Stock Market Woes
Income tax revenue fell by 9.3% because of lower capital gains, attributed to stock market uncertainty.
The Warning From Bond Yields
Rising bond yields indicate that creditors might stop supporting U.S. debt without higher returns, pressuring the government to curb spending.
The Structural Problem
Demographic factors and entitlement structures have been pushing the U.S. towards fiscal issues for years.
The Consequences of Policy Choices
Biden’s policies and the bipartisan tendency to borrow have aggravated the existing deficit problems.
What It All Means
If the government doesn’t take heed, it’s the everyday American who will bear the brunt through reduced purchasing power, higher interest rates, and financial insecurity.
Immediate Action Needed
This rapid increase in the federal deficit has far-reaching implications, not just for the government but for the financial stability and future of every American.
Immediate action is needed to address these fiscal challenges and prevent further harm.
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