US Budget Deficit Hits $1.7 Trillion, Fueling Concerns of Government Shutdown and Election Impact
US Faces $1.7 Trillion Budget Deficit and Looming Government Shutdown Threat
According to the source, the US budget deficit for the past fiscal year reached $1.7 trillion, posing potential challenges for President Biden’s re-election bid in 2024, and the looming threat of a potential government shutdown. The deficit expanded by $320 billion due to a drop in tax revenues and reduced Federal Reserve earnings resulting from higher interest rates, intensifying concerns about a potential shutdown.
While overall government outlays slightly decreased, a cancellation of Biden’s student loan forgiveness program and increased spending in areas such as Social Security and interest on public debt contributed to the deficit growth, with gross interest expense as a percentage of GDP at its highest level since 2001, further raising worries about a potential government shutdown.
The previous fiscal year saw a significant reduction in the budget shortfall, halving due to the US’s pandemic recovery, driven by decreased Covid-related spending as the economy rebounded, providing temporary relief from concerns about a potential government shutdown. However, the growing deficit could complicate discussions on federal agency funding, with a November 17 deadline looming for Congress to address the budget and avert a potential shutdown.
President Biden’s Aid Packages and Tax Revenue Changes Deepen Concerns About Government Shutdown
This situation coincides with President Biden’s request for substantial aid packages for Ukraine and Israel including a $106 billion national security package, further intensifying the debate about a potential government shutdown. The deficit in the latest fiscal year ranks as the third-highest, following the deficits in 2020 and 2021 during the pandemic increasing concerns about the potential government shutdown.
Changes in tax revenue, particularly attributed to the Tax Cuts and Jobs Act of 2017, played a significant role, with revenues falling to 16.5 percent of GDP in 2023, adding to the uncertainty surrounding a potential government shutdown. Despite the US economy’s resilience in the face of higher interest rates credit rating agencies have raised concerns about long-term fiscal risks, deepening the discussions about a potential government shutdown.
Treasury Secretary Janet Yellen highlighted the administration’s focus on steering the economy towards healthy and sustainable growth in light of these fiscal challenges and the potential government shutdown.