TREASURY: FEDERAL DEFICIT GROWS TO $1.7T

America’s federal budget deficit effectively doubled in the 2023 fiscal year as slumping tax receipts, rising interest rates and persistent demand for expiring pandemic relief benefits strained the nation’s finances.

The latest Treasury Department figures showed a budget deficit of $1.7 trillion in 2023, up from $1.37 trillion in 2022. Those numbers make the deficit look smaller than it actually was last year, because of an accounting mirage related to a student loan forgiveness program that President Joe Biden proposed last year.

That program was struck down by the Supreme Court this summer and never took effect. But the Treasury recorded it as a cost in 2022, which inflated that year’s deficit. After the court killed the program, the Treasury recorded it as savings, which artificially reduced this year’s deficit.

Those student loan effects changed the deficit figures for both 2022 and 2023. When factoring them out, the deficit jumped to $2 trillion in 2023 from about $1 trillion in 2022, administration officials confirmed in a call with reporters Friday.

In other words, Treasury assumed it saved $300 billion in 2023, when all it really did was reverse a charge that had never existed.

Officials downplayed the increase in a news release announcing the deficit totals, focusing instead on the strength of the economy and Biden’s proposals to reduce future deficits, largely by raising taxes on high earners and corporations.

“The Biden administration continues to focus on navigating our economy’s transition to healthy and sustainable growth,” Treasury Secretary Janet Yellen said in the release. “As we do, the president and I are also committed to addressing challenges to our long-term fiscal outlook.”

The widening gap between what the government spends and what it earns comes at an uncomfortable moment, as the president looks to a divided Congress for aid to Israel and Ukraine amid concerns about government spending and whether the United States can afford to finance two wars.

Republicans — who helped run up big budget deficits with tax cuts and increased spending when they were in power — have begun insisting on deep budget cuts in order to reduce the federal deficit. The fact that the shortfall widened could make it even more challenging to get Congress to agree on a series of spending bills that must pass by next month in order to prevent a government shutdown.

Despite growing concern in Washington and on Wall Street about the grim fiscal trajectory, lawmakers have been unable to coalesce around plans to enact meaningful spending cuts or tax increases. Economists and deficit hawks warn that the current borrowing path is unsustainable, especially if rates stay high for an extended period of time.