U.S. budget deficit surges again in fiscal year 2023

Recently, the U.S. Treasury Department released a report showing that the U.S. budget deficit for fiscal year 2023 is US$1.695 trillion (approximately 12.4 trillion yuan), an increase of 23% from last year. The soaring fiscal deficit has made the United States' already high debt even worse. Federal Reserve Chairman Powell pointed out in a recent speech that the U.S. government's current fiscal policy is unsustainable. Relevant agencies predict that the high deficit fiscal situation in the United States will never be a short-term behavior, but will continue for a long time in the future. To a certain extent, this will inevitably force the scale of the U.S. national debt to continue to rise. Therefore, the heavy fiscal burden and debt burden will bring unprecedented pressure on the U.S. economy in the future.

There are many reasons for the soaring U.S. fiscal deficit. In addition to the ever-expanding military and social welfare expenditures, there are also the increasing military aid to Ukraine and the recent military aid to Israel. In addition, as the Federal Reserve pushes the U.S. federal funds interest rate to a high level, the interest payments on U.S. Treasury bonds are also rising, and have even exceeded military spending.

The 2023 budget shortfall is larger than any of the Obama administration's budget shortfalls during the Great Recession, and the economy is now considered strong. Typically, a strong economy results in smaller deficits because tax revenue increases. That was not the case in fiscal 2023, when federal revenues fell 9.3% to $4.44 trillion. U.S. Treasury Secretary Janet Yellen quickly blamed the huge deficit on reduced tax revenue, saying it highlighted "the importance of the tax reform policies enacted and proposed by President Biden."

But the biggest problem is spending. The U.S. government’s spending in fiscal year 2023 will be as high as $6.13 trillion. That number is down slightly from last year's total spending, but accounting for student loan forgiveness skews the number. Excluding the reversal of student loan forgiveness, the Biden administration will spend $6.46 trillion in fiscal year 2023, with actual spending increasing 8.8% year-on-year.

The Biden administration also wants to spend more. Biden recently proposed a $100 billion aid package for Israel, Ukraine and other "national security" priorities. Despite the clamor of a handful of Republicans, few in Washington, D.C., are interested in addressing this spending issue. So the fundamental problem is not that the U.S. government doesn't have enough money. The fundamental problem is that the U.S. government spends too much money. It was and still is. Despite the pretense of spending cuts, the debt ceiling deal doesn't solve the problem. Even with new plans, spending will increase. And spending is now at an all-time high. This means that huge budget deficits will continue to exist and the U.S. national debt will continue to increase.

The expansion of the budget deficit may mean that the U.S. government has to tighten spending and make deficit reduction a priority for a period of time, thereby squeezing the development space for other federal affairs. It may also lead to tax increases, further increasing the burden on American consumers and businesses. Republican Senator John Cornyn mocked on Twitter on Sunday that Bidenomics is the idea that the U.S. deficit will explode even as the economy grows.