Deficit soars to $1.1 trillion for first half of fiscal 2023
The federal budget deficit soared to $1.1 trillion for the first half of fiscal 2023, the Congressional Budget Office estimated Monday, $430 billion more than in the same time frame the previous year.
The rising deficit heralds a worsening budget picture for the federal government, especially as interest rates rise. It also presents a problem for President Joe Biden, who had previously boasted about the annual deficit falling as emergency pandemic spending declined.
The nonpartisan budget office has previously projected that the deficit will continue to rise in the years ahead as spending outpaces revenues, driving the federal debt, which represents the accrued deficits, up to record highs.
“Our fiscal challenges will only become more difficult the longer we wait to do anything,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a group that advocates smaller deficits.
The CBO said the deficit rose in the first half of the fiscal year because revenues fell by 3% while spending increased by 13%.
Spending rose especially quickly because of Biden’s cancellation of federal student debt and because interest payments on the federal debt rose as interest rates rose across the economy.
Interest rates have been rising in response to soaring inflation. The Federal Reserve has aggressively raised its interest rate target in an attempt to decrease borrowing and spending and thus drive down inflation.
Interest payments on the debt are expected to be much higher in the years ahead, placing significant pressure on other parts of the deficit. The CBO projected in March that net interest costs would rise from 1.9% of gross domestic product in fiscal 2022 to more than 5% in the next five years.
Congressional Republicans have said they will insist on some spending reforms in exchange for voting to raise the federal debt ceiling, which must be increased by sometime later this year. Biden has said he won’t negotiate over the debt limit and called on the GOP to pass a budget resolution laying out their plans for taxing and spending.