US budget deficit jumps nearly US$1.7 trillion as Social Security, health costs rise

The US government on Friday (Oct 20) posted a US$1.695 trillion budget deficit in fiscal 2023, a 23 per cent jump from the prior year as revenues fell and outlays for Social Security, Medicare and interest costs on the federal debt rose significantly.

The Treasury Department said the deficit was the largest since a COVID-fueled US$2.78 trillion gap in 2021 and marks a major return to ballooning deficits after back-to-back declines during President Joe Biden’s first two years in office.

The deficit comes as Biden is asking Congress for US$100 billion in new foreign aid and security spending, including US$60 billion for Ukraine and US$14 billion for Israel, along with funding for US border security and the Indo-Pacific region.

The big deficit, which exceeded all pre-COVID deficits, including those brought about by Republican tax cuts passed under Donald Trump and from the financial crisis years, is likely to enflame Biden’s fiscal battles with Republicans in the House of Representatives, whose demands for spending cuts pushed the US to the brink of default in early June over the debt ceiling.

A deal to avoid a government shutdown over deeper spending cut demands from Republican hardliners led to the ouster of US House of Representatives Speaker Kevin McCarthy, and the party is still divided over who should lead them, which is expected to make negotiations ahead of a new fiscal deadline in mid-November more difficult.