The U.S. posted a $1.7 trillion deficit for the 2023 fiscal year despite repeated warnings that federal spending is on an unsustainable path.
The federal government spent $1.695 trillion more than it collected in revenue in 2023, a 23% increase over the prior year and the highest since the $2.78 trillion deficit in 2021. The federal government reported $6.1 trillion in outlays on $4.4 trillion in receipts.
As a percentage of GDP, the $1.695 trillion deficit was 6.3%, up from 5.4% in fiscal year 2022. It exceeded all pre-pandemic deficits.
The deficit would have been $321 billion larger, but the U.S. Supreme Court said President Joe Biden’s effort to cancel student loans was unconstitutional.
Federal borrowing from the public increased by $2 trillion during fiscal year 2023 to $26.2 trillion. The increase included $1.7 trillion to finance the deficit and $0.3 trillion in net borrowing related to other transactions. As a percentage of GDP, borrowing from the public grew from 96% at the end of fiscal year 2022 to 98% at the end of fiscal year 2023, according to figures released by U.S. Secretary of the Treasury Janet Yellen and Office of Management and Budget Director Shalanda Young.
The fiscal year 2023 deficit contributed to a national debt of $33.17 trillion through September 2023, according to the Treasury’s Bureau of the Fiscal Service.
The fiscal year 2022 deficit was $1.375 trillion.
In August, Fitch Ratings, an international credit rating agency, downgraded the U.S. government’s credit rating from the highest level of AAA down one tier to AA+. Fitch pointed to the U.S. government’s high national debt and deficits and an “erosion of governance.”
At the end of fiscal year 2022, debt held by the public was about 97% of gross domestic product, according to a May report from the U.S. Government Accountability Office. The U.S. debt is projected to grow faster than the U.S. economy. Debt held by the public is projected to reach its historical high of 106% of GDP within a decade. The Government Accountability Office projects that this ratio could reach more than twice the size of the economy by 2051 without changes in revenue and spending policies.
“The growing debt is a consequence of borrowing to finance increasingly large annual budget deficits,” according to the report. “GAO projects that spending for Social Security, federal health care programs, and all other federal program spending increases more than revenue, resulting in the primary deficit; and net interest spending, which primarily represents the federal government’s cost to service its debt, steadily increases over the next 30 years, further widening the total budget deficits.”