August 08, 2023

CBO July Report Casts a Bleak Fiscal Forecast

Each month, the Congressional Budget Office (CBO) issues Congress’ monthly fiscal report card by cataloging recent federal spending and revenues; signaling to the American people what those updated totals mean for our nation’s subsequent economic health.
Today, CBO released its Monthly Budget Review for July 2023.
Key TakeawayIn the first 10 months of FY 2023 the deficit has amounted to a staggering $1.6 trillion. This is $954 billion (or 131 percent) higher than the same point last year. In just 10 months, the FY 2023 deficit already exceeds last year’s full year deficit by $241 billion. 

  • Then Versus Now: Compared to CBO’s May 2023 baseline, the 2023 deficit is now projected to be $1.7 trillion, about $200 billion higher than the May projection of $1.5 trillion.
  • Washington’s Spending Addiction: Spending is $473 billion (or 11 percent higher) and revenues are $418 billion (or 10 percent lower).

Economic Red Flags:

  • $1.7 Trillion. CBO expects the deficit will reach $1.7 trillion in 2023, about $200 billion higher than its May 2023 projection of $1.5 trillion.
  • Skyrocketing Interest. The largest spending increase was for interest payments on the debt, which increased by $146 billion (or 34 percent) compared to this time last year. 
  • Student Loan Bailout Chaos Hurt the Economy. Spending for the Department of Education increased by $91 billion (or 57 percent), due to President Biden’s student loan bailouts.
  • Never-ending Economic Uncertainty. FDIC spending increased by $52 billion (such spending was negative last year), as the agency dealt with bank failures in the spring.
  • Bidenflation Harming Social Security. Social Security spending increased by $111 billion (or 11 percent), impacted by high inflation.
  • Health Care Spending Continues to Climb. Medicare spending increased by $104 billion (or 18 percent). Similarly, Medicaid spending increased by $29 billion (or 6 percent).

To Make Matters WorseCBO’s monthly budget review for July is further compounded by Fitch Ratings’ August 1 downgrade of the U.S. credit rating from AAA to AA+ for just the second time in our nation’s history.

  • Fitch said: “The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”

Together, Fitch Ratings’ credit rating downgrade and CBO’s latest analysis reiterates what we already know: partisan politics and reckless Washington spending will continue to erode America’s historic record as a global, economic superpower.

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