Biden’s Financial Management Under Scrutiny: Budget Deficit Skyrockets by 23%, U.S. Economy Struggles – His Credibility Takes a Massive Hit. Will It Affect His Re-Election?

As the United States enjoys a period of growth and full employment, President Joe Biden faces questions over his management of the country’s finances. A sharp rise in the budget deficit has put his credibility on the line, raising questions not just about his leadership but also about the future stability of the American economy.

Double Trouble for Biden

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Despite earlier claims of reducing the budget deficit, President Joe Biden now faces the reality that it has actually doubled.

Accounting tricks may show a 23% increase, but the real numbers reveal a much graver situation.

Official Figures Raise Eyebrows

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For the fiscal year ending in September 2023, the U.S. Treasury announced a deficit of $1.695 billion. Compared to $1.375 billion in 2022, the increase is noticeable and worrying.

The Student Loan Controversy

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The administration’s decision to count $379 billion from the canceled student loan program as revenue has muddied the waters.

This accounting maneuver has significantly distorted the real deficit figures.

Media Weighs In

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Both The New York Times and Bloomberg have confirmed that, accounting effects aside, the deficit has effectively doubled.

This news has put the Biden administration under intense scrutiny.

A Year Before Elections

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With elections on the horizon, this financial turmoil complicates Biden’s re-election campaign. The data will likely be a significant talking point for both sides.

Impact on Financial Markets

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The 10-year yield rates have passed the 5% mark for the first time since 2007. This will make it costlier for the U.S. Treasury to manage its debt.

Congressional Stalemate

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Republicans, already divided internally, now have more ammunition to block a $105 billion aid plan.

This could have severe repercussions on U.S. allies, including $60 billion intended for Ukraine.

Economists Are Concerned

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Despite enjoying full employment and growth, experts are worried about this unprecedented fiscal imbalance.

Jason Furman, a Harvard professor, has expressed his alarm at the situation.

Previous Deficit Trends

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The U.S. deficit had declined in 2022, but this was mainly due to expiring Covid-19 relief funds and better tax revenues rather than sound fiscal policy.

The Scissors Effect of 2023

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In 2023, spending has increased by nearly 9%, while tax revenues have fallen by 10%. This imbalance has contributed significantly to the rising deficit.

Revenue Decline

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A 17% drop in income tax revenue and a 1.3% fall in corporate taxes have resulted in reduced income for the government.

Biden blames the Trump administration’s 2017 tax reforms for this.

Inaction on Tax Reforms

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Despite having control of both houses of Congress, the Biden administration failed to pass meaningful tax reforms.

This has raised questions about their handling of the financial crisis.

Where Is the Money Going?

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Increased spending on Social Security, Medicare, and defense has partly offset reductions in health and family assistance.

This imbalance is widening the gap between income and expenditure.

The Burden of Interest Rates

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Interest expenses on U.S. debt have surged to $659 billion, making it a critical issue. The rates are expected to climb, adding further stress on the economy.

Why Deficits Suddenly Matter

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After years of ignoring the problem, rising interest rates mean the country can no longer afford to be complacent about deficits.

It’s a wake-up call for policymakers and the American public alike.

Wide Reaching Implications

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From the economy to national security, the soaring budget deficit and the resulting scrutiny of Joe Biden’s financial management have tangible implications for the American people.

It’s a stark reminder that in the world of economics and governance, credibility is often your most valuable asset.

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The post Biden’s Financial Management Under Scrutiny: Budget Deficit Skyrockets by 23%, U.S. Economy Struggles – His Credibility Takes a Massive Hit. Will It Affect His Re-Election? first appeared on Mama Say What?!

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Mark Garro is an Aussie former CPA and corporate finance manager turned research writer. After more than two decades simplifying complex analyses for leading companies, including Goldman Sachs, Marks & Spencer, and Tabcorp, he packed up and moved to the Italian Riviera. Now he covers all things related to finance and equity research for a diverse range of publishers and syndicators around the world.