The federal government posted a budget deficit of $1.8 trillion during the fiscal year that ended Sept. 30, despite increased tax revenues, due to increased spending and the resulting rapid increase in interest costs. $35.6 trillion national debt.
The only good news contained in the Congressional Budget Office Latest earnings report That is, the federal budget deficit did not worsen significantly during the most recent fiscal year. The deficit increased further mere The year-on-year increase was $139 billion.
But the fact that the deficit increased at all in a year when revenue from federal tax collections increased 11 percent, from $4.4 trillion to $4.9 trillion, suggests something about the nature of the fiscal problems facing the federal government. are. Specifically, it’s a matter of spending. The federal government spent $6.75 trillion last year.
Specifically, it’s a debt issue. Spending increased about 10 percent from a year earlier, but interest payments on the national debt soared 34 percent, from $710 billion to $950 billion. This rapid increase reflects the scale of the national debt. Approximately the same size as the country’s annual economic output Interest rates rose for the first time since World War II, and interest rate increases have been a feature of the economy in recent years.
Interest rates may be trending lower, but that won’t provide much relief. According to CBO projections released earlier this year, the cost of servicing the national debt will be will continue to rise in the next few years. CBO by 2034 estimate The federal government will spend more than $1.6 trillion in interest payments.
More debt means less economic growth and makes it more difficult for governments to decide how to prioritize the taxes left over after interest payments. But you would never know that in this year’s presidential election, where there was little discussion about debt.
Instead, Vice President Kamala Harris and former President Donald Trump are keen to propose ideas that would widen the budget deficit and pile up more debt. According to an analysis by pen wharton budget model, fiscal policy think tank At the University of Pennsylvania, Trump’s proposal would increase the budget deficit by $5.8 trillion over the next 10 years. Meanwhile, Harris said a combination of higher government spending and lower economic growth (as a result of the tax hike plan) will further widen the estimated $2 trillion deficit over the next decade.
Separately, the Committee for a Responsible Federal Budget (CRFB), which advocates for deficit reduction, estimate President Trump’s campaign promise would increase the budget deficit by about $7.5 trillion over the next 10 years. The group estimates that Harris’ budget deficit would increase by about $3.5 trillion. (In both cases, that number can vary widely depending on what policies are implemented and several other factors. But the only constant in the CRFB estimates is that the budget deficit will widen.) That’s what it means.)
This year’s election represents a missed opportunity for the country to seriously debate how much the federal government should spend and (perhaps more importantly) how it should finance that spending. Americans pay more and more taxes each year to fund the federal government, but those taxes are once again insufficient to meet the government’s seemingly endless spending appetite.
