AS IF THINGS AREN'T BAD ENOUGH 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.
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.
The size of the U.S. national debt is now as big as the country’s annual economic output, known as GDP.
Notably, Social Security, Medicare, and Medicaid saw increases in spending by 11%, 12%, and 4%, respectively.
As a result of the rate hikes, the government had to pay an additional $184 billion in interest on the debt compared to the previous year. Additionally, banks like Silicon Valley Bank and First Republic had to pay an extra $101 billion to depositors who were unprepared for the rate hikes.
The deficit also grew partly due to a decrease in federal revenue, primarily caused by the higher interest rates.
Biden’s policies and the bipartisan tendency to borrow have aggravated the existing deficit problems.
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.
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.
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.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. A large part of this increase is due to inflationary spending by the federal government.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.Notably, Social Security, Medicare, and Medicaid saw increases in spending by 11%, 12%, and 4%, respectively.
Federal Reserve’s Counteraction
The Federal Reserve raised interest rates to over 5% to combat inflation, reducing it to around 4%, which is still double the Federal Reserve’s target.As a result of the rate hikes, the government had to pay an additional $184 billion in interest on the debt compared to the previous year. Additionally, banks like Silicon Valley Bank and First Republic had to pay an extra $101 billion to depositors who were unprepared for the rate hikes.
The deficit also grew partly due to a decrease in federal revenue, primarily caused by the higher interest rates.
Stock Market Woes
Income tax revenue fell by 9.3% because of lower capital gains attributed to stock market uncertainty. While 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.Biden’s policies and the bipartisan tendency to borrow have aggravated the existing deficit problems.
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.
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.
