U.S. Fiscal Year Ends with $1.7 Trillion Budget Deficit, Up 23%

The U.S. Department of the Treasury announced on Friday that the federal government concluded its fiscal year in September with a budget deficit of just under $1.7 trillion. This figure represents an increase of about $320 billion, or 23.2%, compared to fiscal 2022, although it falls short of some initial projections that foresaw a deficit surpassing $2 trillion.

The substantial deficit was primarily driven by a $457 billion decline in revenue from the previous year, coupled with a modest reduction of $137 billion in expenses. Total outlays for the year amounted to $6.134 trillion.

This budget shortfall contributes to the already significant U.S. national debt, which reached $33.6 trillion earlier in the week. The deficit level saw a partial reduction when the Supreme Court invalidated President Joe Biden’s attempt to eliminate billions in student loan debt.

The national debt has surged by over $10 trillion since the first quarter of 2020, as the government initiated substantial spending measures in response to the economic impact of the Covid-19 pandemic.

Among the government’s expenditures last year, approximately $659 billion was allocated for net interest on the accumulated debt, up from $475 billion in fiscal 2022.

Treasury Secretary Janet Yellen affirmed the administration’s commitment to addressing long-term fiscal challenges, highlighting several measures aimed at reducing the deficit over the next decade. Yellen stated, “The U.S. economy remains resilient despite global headwinds,” and dismissed previous expectations of a U.S. recession in 2023.

Managing the debt has become more costly over the past year as the Federal Reserve increased benchmark interest rates to counter inflation. The central bank’s key lending rate rose by 5.25 percentage points, leading to a corresponding increase in Treasury yields. The 10-year Treasury note has approached a 5% yield, a notable contrast to the less than 1% level observed in 2020.

This budget report coincides with President Biden’s request to Congress for a $105 billion allocation for “national security priorities,” including $61 billion for Ukraine, along with humanitarian aid for Israel and Gaza.

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