For months after Covid-19, Joe Biden boasted of being the president who had reduced the budget deficit the most. He is now the one who has doubled it, even if an accounting trick allows us to believe that it has increased “only” by 23% this year. The US Treasury announced for the fiscal year ending September 30, 2023 an official budget deficit of $1,695 billion, or 6.3% of gross domestic product (GDP), compared to $1,375 billion for 2022 (5.4 %).
Except that these figures published Friday October 20 do not correspond to reality, due to the student debt cancellation program decided in 2022 by Joe Biden but reversed this summer by the Supreme Court. This project led to an increase in the deficit of 379 billion in 2022, which no longer exists: the real deficit was in reality only 996 billion dollars that year. But rather than correcting the 2022 figure, the Biden administration decided to record these 379 billion in revenue for the year 2023, which artificially reduces this year’s deficit. THE New York Times dismantled this sleight of hand on Friday evening: “ These effects of student loans changed the deficit figures for 2022 and 2023. Excluding them, the deficit increased to $2 trillion in 2023, from about $1 trillion in 2022.” “Excluding the accounting effects of the Biden plan”the deficit “effectively doubled”confirms the Bloomberg agency.
This development complicates the president’s task one year before the presidential election. The rise in ten-year rates, which crossed the 5% mark for the first time since July 2007, will increase the debt burden for the US Treasury. The Republicans, who are paralyzing Congress with their internal divisions, will have additional arguments for not voting for the 105 billion aid plan for the allies of the United States, including 60 billion for Ukraine. Enough to relaunch the debate on budgetary policy, while the country recently found itself on the verge of default and the closure of the federal state.
Scissor effect
The budgetary drift dismays economists, while the country is experiencing full employment and reasonable growth above 2%. “To see this in an economy with low unemployment is truly astonishing. There has never been anything like this”, declared in September Washington Post Jason Furmanprofessor at Harvard and former advisor to Barack Obama.
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