US Federal Budget Deficit Hits $1.1 Trillion

President Joe Biden talks about his proposed fiscal year 2024 federal budget during an event in Philadelphia, Pa. Chip Somodevilla/Getty Images

The U.S. federal budget deficit has exceeded a $1 trillion in the first half of fiscal year 2023, with revenues declining and outlays growing.

The budget deficit between October 2022 and March 2023 is estimated to be at $1.1 trillion, according to a report (pdf) by the Congressional Budget Office (CBO) on April 10. This is $430 billion more than the shortfall recorded during the same period in the last fiscal year. While outlays or budgetary expenses grew by 13 percent in the first six months, revenues dipped by 3 percent.

“Outlays in the past six months were reduced by the shifting of certain payments—totaling $63 billion—from Oct. 1, 2022 (the first day of fiscal year 2023) into fiscal year 2022, because October 1 fell on a weekend,” the report said.

“At the same time, outlays increased through March 2023 because certain payments that otherwise would have been due on April 1, a weekend, were made in March. The deficit in the first half of fiscal year 2023 would have been $10 billion smaller if those various shifts had not occurred.”

The deficit for March was estimated to be at $376 billion, up from $262 billion in February. It is $183 billion more than the shortfall in March 2022. The federal government has run deficits in each of the six months so far in fiscal year 2023.

The monthly budget review report comes as experts have raised concerns about the situation. During a March 29th hearing of the House Budget Committee that discussed the country’s financial outlook, multiple witnesses recommended cutting down the size of the federal budget deficit.

“Deficits and debt are projected, especially in the next decade, to reach levels that, simply, none of us would be comfortable with,” said ranking member Rep. Brendan Boyle (D-Pa.).

Outlays and Revenues

Total receipts in the first half of fiscal year 2023 are estimated to be $2 trillion. The CBO calculates these receipts to be $73 billion, or 3 percent, less compared to the same period in the previous fiscal period.

Individual income and payroll taxes declined by a combined $33 billion. Collections from corporate income taxes rose by a net 13 percent. Revenues from other sources fell by $53 billion net, which included a $60 billion decline in remittances from the Federal Reserve.

Meanwhile, outlays in the first six months came in at $3.1 trillion, which is $357 billion more than in the six months of fiscal year 2022.

For the largest mandatory spending programs, outlays rose by a net $132 billion. This includes a $61 billion increase in spending on Social Security benefits, a $49 billion hike in Medicare outlays, and a $22 billion rise in Medicaid outlays.

Rising Federal Deficit, Debt Risk

In its economic forecast for the United States, tax advisory provider Deloitte warned that the country will face a crisis if Washington fails to eventually find ways to cut down the deficit and borrowing.

“Our baseline forecast assumes deficits will rise to US$1.7 trillion by fiscal year 2027. That’s a hefty amount, one that inevitably raises the question of whether the U.S. government can continue to borrow at such a pace. The answer is that it can—until investors lose confidence,” Deloitte said in the forecast report.

The company foresees the need to raise the limit on U.S. Treasury borrowing as potentially leading to a global financial crisis. The Treasury Department has to borrow money regularly for covering the federal deficit. However, it needs the authorization of Congress to do so.

At present, both Republicans and Democrats are at loggerheads on raising the debt ceiling. The U.S. national debt currently stands at $31.4 trillion. On April 5, House Speaker Kevin McCarthy (R-Calif.) said that he was “very concerned” about the debt ceiling due to the rising cost of servicing the trillions of dollars in debt.

During an interview with The Epoch Times, Peter C. Earle, an economist at the American Institute for Economic Research, said that if the U.S. government were to miss even a single payment on its debt-service obligations, “the global appetite for U.S. Treasury instruments is likely to decline substantially.”

“That means two things: higher yields on U.S. government bonds, which will in turn make debt payments even more expensive going forward,” he added.