According to a recent report by the Committee for a Responsible Federal Budget (CRFB), the federal government's budget deficit has grown to $2.1 trillion over the past 12 months, more than twice as large as the pre-pandemic deficit. The report found that the 12-month rolling deficit is up $170 billion compared to last month due to a $236 billion monthly deficit announced last week for May 2023. This increase is attributed to spending increasing by 11% as tax revenue fell by 6%. The CRFB notes that significant policy change will be needed to bring spending and revenue in line, and that much more action will be needed to stem the unsustainable medium- and long-term trajectory of the debt.
Deficits have totaled 8.1% of gross domestic product (GDP) over the past year, more than three times the historical average of 2.5% and three percentage points higher than 2019. The widening deficits come as federal spending has risen on Medicare, Social Security, interest on the debt, and the pending student debt cancellation plan which the Supreme Court may either allow to proceed or block when it rules on the topic in the next month.
Tax revenue has slowed compared to a year ago, declining from a near-record of 19.6% of GDP in fiscal year 2022 to about 17.2% of GDP in the past 12 months - a level more in line with historical averages. By contrast, federal spending amounted to about 25.3% of GDP over the last 12 months, leaving a deficit amounting to 8.1% of GDP.
The Congressional Budget Office (CBO) released its monthly budget update last week, which found that in the first eight months of fiscal year 2023, the deficit totaled $1.2 trillion - an increase of $735 billion compared to the same period a year ago. The CBO's current projection for FY2023 is that the federal budget deficit will total $1.5 trillion for the fiscal year, although the agency notes that estimate "is subject to considerable uncertainty" because revenue collections may continue to lag forecasts and spending may differ as well. The CRFB suggests that policymakers should work together to get the economy and the country's fiscal health back on track.