Federal Budget Deficit More Than Doubles in FY2023, Reaches Record High

In a startling revelation, the nonpartisan Congressional Budget Office (CBO) announced on Tuesday that the federal government’s budget deficit has more than doubled in the first 10 months of the current fiscal year when compared to the same period last year. The CBO’s latest budget review highlights the staggering increase in the deficit, which has raised concerns among experts and policymakers alike.

According to the CBO’s findings, the federal deficit for the first 10 months of fiscal year 2023 stood at a staggering $1.6 trillion, a significant rise from the $726 billion deficit recorded during the corresponding period in the previous fiscal year. The report attributes this substantial surge in the deficit to a combination of factors, primarily a 10% increase in federal spending and a corresponding 10% decrease in tax revenues.

Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, expressed alarm over the growing deficit. “With just two months left in the fiscal year, we’ve now borrowed $5.3 billion per day and have already surpassed all of last year’s deficits. The deficit this year and next year are on track to be 50 percent larger than before the pandemic, despite the fact that the pandemic is over and the economy seems to be growing at a steady clip,” MacGuineas stated.

The CBO’s revised projection for the federal deficit in FY2023 now stands at approximately $1.7 trillion, which is $200 billion higher than the forecast issued in May. If this projection holds true, it would mark one of the largest budget deficits in U.S. history.

This remarkable increase in the deficit comes as a surprise to many, especially considering that several COVID-19 pandemic relief programs have already concluded. These relief efforts had previously contributed to the largest deficits in U.S. history due to heightened spending and reduced economic activity, leading to diminished tax revenues.

In the wake of the pandemic, the U.S. witnessed an unprecedented budget deficit of over $3.1 trillion in FY2020, with Congress approving extensive spending measures aimed at addressing the pandemic’s economic fallout. These included the CARES Act and the subsequent $1.9 trillion American Rescue Plan Act enacted by Democrats.

Despite the end of many of these pandemic relief programs, the deficit remained substantial, narrowing only slightly to nearly $1.4 trillion in FY2022. The CBO’s data indicates that this figure was still the fourth-largest annual deficit in U.S. history, trailing only the deficits of the previous two years and the FY2009 deficit that emerged during the financial crisis.

The CBO’s updated deficit projections coincide with a recent decision by Fitch Ratings to downgrade the U.S. government’s credit rating from ‘AAA’ to ‘AA+’. Fitch cited factors such as partisan conflicts over fiscal policies and the debt limit, as well as an anticipated decline in fiscal health over the next few years, as reasons for the downgrade. Fitch also predicts that the federal government’s deficit will rise to 6.3% of the gross domestic product (GDP) in 2023 and 6.9% of GDP in 2025. This anticipated increase is attributed to sluggish economic growth and rising interest costs associated with servicing the U.S. national debt, which now exceeds $32 trillion.

The growing deficit and the subsequent credit rating downgrade serve as a stark reminder of the challenges facing the U.S. government’s fiscal management, urging policymakers to address these concerns promptly to ensure the nation’s economic stability and long-term financial well-being.