After running a $1.3 trillion deficit in fiscal 2022, the U.S. government took up right where it left off to start fiscal 2023 — running yet another big budget deficit.
The October budget shortfall came in at $87.8 billion despite another month of healthy government receipts, according to the latest Treasury statement.
The federal government collected $318.58 billion in taxes and other revenue in October. That was a 12.2 percent increase in revenue over last October.
Strong government revenues in October continued a trend we saw during the last fiscal year. Uncle Sam was flush with cash in 2022. The Treasury took in $4.9 trillion. According to a Tax Foundation analysis of Congressional Budget Office data, federal tax collections were up 21 percent in the 2022 fiscal year that ended on Sept. 30. Tax collections also came in at a multi-decade high of 19.6 percent as a share of GDP.
So, the federal government’s problem isn’t a lack of money. It is a spending problem.
The spending didn’t slow down as we kicked off fiscal 2023. The Biden administration blew through $406.37 billion in October.
Spending this past October was just slightly lower than last year, but there is more spending coming down the pike.
The U.S. government is still handing out COVID stimulus and the Biden administration wants more. Congress recently pushed through another massive spending bill. Meanwhile, the U.S. continues to shower money on Ukraine and other countries around the world. And we’re just starting to see the impact of student loan forgiveness.
On top of increased spending, rising interest rates pushed up by the Federal Reserve to fight inflation will push the deficits up even more. Interest expenses increased $12 billion month-on-month and were up 40 percent compared to just one year ago.
According to the Congressional Budget Office, interest expense is about to balloon. It projects interest payments will triple from nearly $400 billion in fiscal 2022 to $1.2 trillion in 2032. And it’s worse than that. The CBO made this estimate in May. Interest rates are already higher than those used in its analysis.
If interest rates remain elevated or continue rising, interest expenses could climb rapidly into the top three federal expenses. (You can read a more in-depth analysis of the national debt HERE.)
According to the National Debt Clock, the debt-to-GDP ratio is 121.51 percent. Despite the lack of concern in the mainstream, debt has consequences. More government debt means less economic growth. Studies have shown that a debt-to-GDP ratio of over 90% retards economic growth by about 30 percent. This throws cold water on the conventional “spend now, worry about the debt later” mantra, along with the frequent claim that “we can grow ourselves out of the debt” now popular on both sides of the aisle in D.C.
To put the debt into perspective, every American citizen would have to write a check for $93,819 in order to pay off the national debt.