The U.S. budget deficit widened last year as companies and households paid less in taxes while the cost of debt rose, making Joe Biden’s task more difficult a year after the presidential election.
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The deficit rose 23% in fiscal 2023, which ended Sept. 30, compared to fiscal 2022, reaching $1.695 billion, the Treasury Department announced Friday.
Federal spending fell by 2.0% last year.
However, sales fell even more, falling by 9.0%. The main issue here is the tax revenue not only from companies, but above all from private households, which is by far the federal government’s most important source of income.
On the expenditure side, the state suffered from the rise in interest rates in 2023: its debts cost it significantly more than in the previous year.
This means that $879 billion in interest was paid out, $162 billion more than in 2022.
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The decline in tax revenue underscores “the importance of the tax system reform measures adopted or proposed by President Biden,” the Democratic administration said in a statement.
Joe Biden advocates making the wealthiest Americans and big corporations pay more taxes, but those measures are overwhelmingly opposed by Republican opposition.
“President Biden’s economic plan builds an economy that grows the middle class while reducing the deficit by ensuring the wealthy and large corporations pay their fair share,” assured House Budget Office Director Blanche (OMB ), Shalanda Young of this press release.
Given the decline in tax revenue, the Biden administration also blamed Donald Trump’s 2017 tax reform.
These revenues “returned to low levels in 2023, consistent with forecasts after the passage of the 2017 law,” a decline that was “the main reason for the increase in the deficit to GDP.”
The deficit is 6.3% of gross domestic product (GDP), compared to 5.4% last year.
The former Republican president is currently considered Democrat Joe Biden’s main rival for the presidential election in November 2024.
Budget 2024 blocked
These numbers come at a time when U.S. spending and debt are already the subject of a bitter political battle between Republicans and Democrats.
The 2024 budget is deadlocked due to disagreements over spending.
And agreement is impossible at this point because the House has been without a president for two weeks due to divisions between moderate Republicans and Trumpists.
However, both camps barely have a month left to avoid a state paralysis or “shutdown,” which was narrowly avoided for the first time in September.
Back in June, both camps signed a last-minute agreement to avoid default. Joe Biden had committed to capping certain spending to keep it stable in 2024, excluding military spending, and increasing it by 1% in 2025, excluding inflation.
He also agreed to cut $10 billion in funding for tax authorities to modernize and strengthen controls.
In 2022, the United States budget deficit was reduced by half compared to 2021.
The end of Covid-19 relief measures had allowed spending to be reduced, while the recovery of the American labor market had led to higher income tax revenue, by far the state’s most important source of revenue.
The deficit reached a historic record of over 3,000 billion in 2020, due to spending related to the COVID-19 health crisis.