An Update on the US Government Deficit, Debt, and Revenue Shortfalls

Yesterday, I saw the federal deficit in fiscal year (fy) 2023 was about $2 trillion with total debt approaching $33 trillion.

With rising interest rates, interest payments on this debt will soon exceed $1 trillion annually, though actual interest payment expenditures aren’t yet that high in fy 2023, but they will be in fy 2024 unless interest rates fall rapidly. But interest rates are unlikely to fall because the higher interest rate is what attracts buyers of US government debt. I suppose policymakers could monetize the debt, which seems to be an emerging plan as per the Federal Reserve’s recent Jackson Hole meeting.

The above referenced document discusses a research paper Stanford Professor Darrell Duffie, which advocates for the direct monetization of debt by the Federal Reserve, which, by the way, is not lawful. (A big thanks to John Titus for sharing this document)

In fy 2023, total revenue (not including borrowing) collected by the federal government was $3.7 trillion, down from $4.1 trillion in fy 2022. Revenues are down by more than $400 billion over last year.

The $2 trillion deficit is more than half of revenue coming in.

Consider the following four expenditure categories:

Social Security expenditures = $1.1 trillion

Medicare expenditures = $0.64 trillion.

Defense = $0.69 trillion

Interest payments = $0.58 trillion

These four expenditure categories tally to $3 trillion.

Social Security and Medicare are promises to the American people in old age. Interest payments must be paid to keep the game going. The war machine is the teeth behind the dollar reserve currency system and the current financial structure.

Is the current trajectory sustainable, and if not, what is going to give? What is the most likely path forward?

Published by markskidmore

Mark Skidmore is Professor of Economics at Michigan State University where he holds the Morris Chair in State and Local Government Finance and Policy. His research focuses on topics in public finance, regional economics, and the economics of natural disasters. Mark created the Lighthouse Economics website and blog to share economic research and information relevant for navigating tumultuous times.

2 thoughts on “An Update on the US Government Deficit, Debt, and Revenue Shortfalls

  1. FYI: The statement “Social Security and Medicare are promises to the American people in old age” is incorrect. The supreme court ruled (in a case the name of which I cannot remember) that there is no obligation for the government to pay social security to people. It is a tax and receipts are a “privilege”. The payments may be presented as a promise but they are empty ones.

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