A new report from the Congressional Budget Office's (CBO) Committee for a Responsible Federal Budget (CRFB) reported that the federal budget deficit reached $1.2 trillion over the past eight months. The figure represents an increase of more than $735 billion compared to the same period last year ($426 billion).
CRFB's analysis indicated that from October 2022 to May 2023, federal revenues were 11% lower than those recorded in the same period of 2022. On the other hand, expenses were 9% higher compared to the same time last year.
Increased spending and lower revenues
The report indicated that the increase in the deficit was due in part to lower-than-estimated revenues from tax collections, specifically $299 billion less (10%).
In addition to lower revenues, government-funded programs experienced large increases in funding, resulting in higher spending:
- Social Security benefits: $85 billion (up 11%).
- Medicare: $77 billion (17%).
- Medicaid: $31 billion (8%)
- Net interest disbursements on public debt: $112 billion (34%).
The CBO estimated a federal budget deficit of $1.5 trillion by 2023, though it noted that the forecast "is subject to considerable uncertainty."
Policymakers should work together to get the economy and our fiscal health back on track.
Deficits total 8.1% of GDP in 2022
The deficit for the year 2022 totaled $2.1 trillion. According to the report, "deficits reached 8.1% of Gross Domestic Product (GDP) during the past year, more than three times the historical average of 2.5% and three percentage points higher than in 2019."
Federal spending reached 25.3% of GDP last year. The increase is due in part to the investment of more public money in government plans and programs such as net interest, Medicare, and Social Security.
With deficits expanding, substantial policy change will be needed to align spending and revenues. ... The reduction (and possible reversal) of student debt cancellation and the implementation of the Fiscal Responsibility Act are likely to help reduce deficits in the short term, but much more action will be needed to halt the unsustainable medium- and long-term trajectory of debt.
On the other hand, revenue collection decreased by 17.2% of GDP in the last year.
