The 2023 fiscal year ended in September and the US Treasury has just unveiled a staggering increase in the US budget deficit, now reaching $1.7 trillion. However, this number, seems to conceal a larger truth—an actual $2 trillion deficit that emerged due to the failure of the Biden administration's proposed student loan forgiveness program.
The US budget deficit is a measure of the difference between government spending and tax revenue. The Treasury's report to the nation suggests a modest increase in the deficit, only rising by approximately $320 billion from $1.37 trillion in fiscal year 2022 to $1.7 trillion in 2023. This appears to be a facade constructed by the Treasury to obscure the real figures, a result of a plan that fell through the cracks.
President Joe Biden's proposal for a student loan forgiveness plan, introduced in August 2022, aimed to offer debt relief to low- and middle-income families. Over a year later, the Supreme Court declared this program unconstitutional. Instead of decreasing the 2022 fiscal year deficit to $1 trillion, it contributed to the surge, elevating it to $2 trillion this past year, widening the gap between spending and tax receipts.
The deficit surge may also relate to recent foreign affairs, such as Biden's $100 billion request for foreign aid to Ukraine and Israel amid ongoing conflicts. Some politicians swiftly blame the 2017 Republican tax cuts, contending they reduced tax revenues.
White House press secretary Karine Jean-Pierre labeled it as 'MAGA-nomics' but didn't attribute responsibility to the current administration. While the national deficit might have been lower without these tax cuts, the gap widens as taxes drop and spending rises. If the tax cuts were coupled with efforts to cut spending and enhance tax revenue utilization, the deficit might have declined steadily.
This trend is believed to be linked to claims and potentially fraudulent ones, related to pandemic-era tax credits that incentivized companies to continue paying employees during the Covid crisis, even when their businesses suffered.
The IRS also postponed tax-filing deadlines for victims of natural disasters, such as those in California, pushing some tax payments into the current fiscal year. Additionally, payments on net interest have surged by nearly $659 billion in the last year alone.
The future of American taxes might hinge on programs like Social Security and Medicare as a new wave of Americans prepares for retirement. Spending on these programs has been escalating, and as millions more retire, costs will soar, widening the gap between spending and funding. Consequently, more of these costs will fall on American taxpayers.
Biden's proposed solution to the deficit is to increase taxes on high earners and corporations. Because of the failed student loan forgiveness program, Americans may soon face increased taxes, reversing the efforts of previous administrations in reducing future deficits.
Little attention is given to the declining tax receipts despite citizens contributing more to tax dollars. Bipartisan representatives blame each other, leaving American citizens to bear the consequences of their divisions and poor decision-making.