KEY TAKEAWAYS
- The deficit for fiscal year 2023 was $1.7 trillion, growing 23 percent in a single year.
- Interest payments even surpassed all military spending in the bloated Department of Defense budget by $103 billion.
- Two-thirds of Americans disapprove of the economy today. Since Mr. Biden took office, the typical American family has effectively lost $7,300 in annual income.
With all the chaos and heartbreaking loss of life around the world today, few noticed the Treasury Department drop a financial bomb: the deficit for fiscal year 2023 was $1.7 trillion, growing 23 percent in a single year as the Treasury used $879 billion just to service the federal debt. But Bidenomics means the worst is yet to come, and multi-trillion-dollar deficits are the new normal.
The impetus for these massive deficits is federal government spending, which tipped the scales at $6.1 trillion last year. Government receipts, meanwhile, were $4.4 trillion, woefully short of the $5 trillion previously forecasted. A slowing economy and counterproductive tax increases were key drivers behind the $457 billion drop in receipts from the prior fiscal year.
Yet, even these reduced revenues would’ve resulted in a balanced budget if President Joe Biden had simply allowed spending to return to its pre-pandemic level. Instead, Treasury outlays are up 38 percent today compared to pre-pandemic times.
That’s why it’s so deceptive for the Treasury to have recently announced that the deficit is $1 trillion lower than when Biden took office. Elevated spending levels in 2020 should’ve been one-time emergency measures, but the Biden administration institutionalized $6-trillion budgets by simply replacing pandemic-era outlays with the Biden agenda.
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Even worse, the $1.7-trillion deficit in the last fiscal year was really a $2-trillion deficit. It was reduced only in a technical sense by $300 billion when the Supreme Court blocked Mr. Biden’s student loan handout scheme. The Treasury has merely reallocated that money to be spent in fiscal year 2024 because the Biden administration is hellbent on achieving its unconstitutional student loan bailout.
In other words, the unfunded spending has merely been moved from one ledger column to another. Of that $300 billion, tens of billions have already been allocated to selective student loan bailouts, while the rest will fund a broader bailout beginning next summer, known as the SAVE repayment plan, an end-run around the Supreme Court’s ruling against the Biden administration.
But just looking at the spending that’s officially included in the last fiscal year is terrifying. It has resulted in a truly unprecedented level of federal debt: now more than $33.5 trillion. The breakneck pace of borrowing is increasing almost daily, with the Treasury borrowing $500 billion just in the first three weeks of the current fiscal year, which began October 1.
As the federal debt and interest rates rise, the cost of servicing the debt has completely exploded, eclipsing all but two line items of the Treasury’s report: the Social Security Administration and the Department of Health and Human Services. Interest payments even surpassed all military spending in the bloated Department of Defense budget by $103 billion.
Despite this being an obviously unsustainable path, the Biden administration is doubling down, promising more government spending and multi-trillion-dollar deficits forever. Financial markets are beginning to wake up to the fact that the Treasury eventually won’t be able to pay its debts—and that day may arrive soon.
Consequently, investors are demanding higher yields when lending money to the Treasury, which is increasing the cost to service the debt. As massive deficits continue growing the debt, gross interest outlays are exploding as new debt is issued at higher interest rates.
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The icing on the cake is that the Treasury doesn’t actually pay off debt when it matures. It simply issues new debt to pay off the old, along with the interest. Trillions of dollars in existing debt at low interest rates will rollover at rates two to three times as high within the next year.
This all combines into a debt death spiral that will cost the Treasury—and therefore the taxpayer—over $1 trillion just in interest during the current fiscal year, which won’t reduce the debt by a penny.
Nevertheless, the Treasury recently praised what should’ve been described as a horrific annual report as proof that Bidenomics is working, “building the economy from the middle out and bottom up.” Have they not noticed that the middle has imploded, and the bottom has fallen out?
Two-thirds of Americans disapprove of the economy today. Since Mr. Biden took office, the typical American family has effectively lost $7,300 in annual income. The monthly mortgage payment on a median price home has more than doubled. It will cost 25 percent more to heat your home this winter. Rents are at record highs. Americans are drowning in over $1 trillion of credit card debt.
But while the family budget deteriorates to finance a burgeoning federal budget, the Treasury fiddles as the nation’s finances burn around it. We’re running out of time.
By EJ Antoni
EJ Antoni is a Research Fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.
