The Deficit Was $2.3 Trillion Over Past Year
The federal budget deficit totaled $2.3 trillion over the past 12 months, up 65 percent from the $1.4 trillion deficit in Fiscal Year (FY) 2022 and more than twice as large as the deficit prior to the beginning of the pandemic. The following is an update of last month's analysis, incorporating the latest data from the Congressional Budget Office (CBO).
Compared to the prior 12 months, total nominal spending is up 16 percent to $6.7 trillion and revenue is down 7 percent to $4.5 trillion.
As a share of the economy, deficits have totaled 8.6 percent of Gross Domestic Product (GDP) over the past year - more than double the 50-year historical average of 3.6 percent.
Spending has totaled 25.5 percent of GDP over the past year, compared to 23.5 percent in the prior year. CBO expects a boost in savings when the reversal of student debt cancellation is recorded in August or September, in light of the Supreme Court's ruling. This cost along with rising spending on Social Security, Medicare, and interest have more than offset declining spending on pandemic relief.
Meanwhile, the recent temporary revenue surge has ended, with revenue falling from a near-record 19.6 percent of GDP in FY 2022 down to 16.9 percent of GDP over the past 12 months – below the average and what the Congressional Budget Office projected it would be back in 2018.
Substantial policy change will be needed to bring spending and revenue in line. The recent Supreme Court ruling against the legality of student debt cancellation and the implementation of the Fiscal Responsibility Act will likely help reduce deficits in the near term, but much more action will be needed to stem the unsustainable medium- and long-term trajectory of the debt. Policymakers should work together to get the economy and our fiscal health back on track.