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The Growing U.S. Federal Budget Deficit


The U.S. federal budget deficit is projected to double from $1 trillion last year to $2 trillion this year, according to a recent estimate by the Congressional Budget Office (CBO). It should be noted that this projection excludes President Joe Biden’s unsuccessful plan to forgive student loans.

When taking into account the student-loan program, this year’s deficit is expected to be approximately $330 billion smaller than initially estimated. However, this adjustment is merely an accounting measure. In the previous year, the program had already contributed to a deficit increase of $379 billion.

As per the CBO’s estimate, revenues for the current fiscal year are 10% lower and outlays are 3% higher compared to the prior year.

Concerns on Wall Street

The ballooning deficit and federal debt have raised concerns on Wall Street. Analysts believe that it is one of the factors contributing to higher bond yields.

A Political Stalemate

The deficit has become a contentious issue in the political arena, with no resolution in sight.

House Republicans frequently invoke it to advocate for further spending cuts beyond the previously agreed-upon level when the debt ceiling was raised. On the other hand, Democrats in the White House and the Senate argue that Republicans are unwilling to consider any tax hikes on the wealthy, which could contribute to bolstering government coffers and reducing the deficit.

Outlook and Projections

The full fiscal-year deficit report from the Treasury is expected to be released in mid-October. However, before that, on Tuesday, the department will disclose the deficit for August, marking the 11th month of the fiscal year that concludes on September 30.

According to the CBO’s forecast, there is a notable shift in August’s numbers. The U.S. is projected to record a budget surplus of $90 billion, compared to a deficit of $220 billion in the same month last year. This significant change is primarily attributed to the decrease in outlays related to the student-loan program, which will be reflected in last month’s figures.

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