/Pogled.info/ More than a trillion dollars – even the colossal 34 trillion debt does not help to cover such a budget deficit, because the costs of servicing it and paying interest are also a trillion. Joe Biden raised the loan ceiling early so as not to “get in the way” during the election. But here, it seems, the president no longer has anything to worry about – his rating has fallen to the lowest level.
Huge expenses
In February, the US federal budget received 271 billion, and more than twice as much was spent – 567 billion, the Ministry of Finance announced. The total deficit of the current fiscal year (started on October 1, 2023) reached 828 billion – this is the second highest figure after the pandemic year 2021.
In March, the situation seemed to have slightly improved: the deficit decreased on an annual basis by 38%. The explanation is simple: the peak season for filing tax returns has arrived.
The rest of the picture is the same: in six months the negative balance exceeds a trillion – 1.07.
Rising interest rates
Thus, despite acceptable economic growth, the federal budget deficit is about six percent of GDP. Analysts believe that one of the main drivers of the negative dynamics is the increase in debt interest rates.
Federal Reserve interest payments rose sharply to $429 billion. A year earlier, it was 301 billion for the same period.
“The huge deficit looked manageable when the Federal Reserve set interest rates at zero and bought hundreds of billions of dollars in US government bonds. But with the federal funds rate above five percent, government spending and Treasury bond issuance are rising so fast that there are concerns about demand for what was once the world’s safest investment,” notes Bloomberg.
Nothing to cover
Forecasts are not optimistic, no one is under any illusions.
For the full fiscal year, the deficit is likely to reach $1.8 trillion. Given the strength of the US economy, one might assume that the situation will be corrected in 2025, but no: the draft budget recently released by the Biden administration shows a deficit of 2.7 trillion.
The US is in “terrible shape,” said former Treasury Secretary Robert Rubin.
The problem is complicated by the constant growth of the external debt, which exceeded 34 trillion. The government is issuing more and more bonds, including to cover the budget deficit. However, the interest payments are already a trillion a year. Funds for debt service must again be taken from the exhausted budget.
Exceeded the size of the economy
And the central banks of leading countries have recently been selling off government bonds. Lenders increasingly doubt the government’s ability to pay interest. US external sources of funding are drying up.
At the end of 2023, the Congressional Budget Office indicated that the debt was approaching a critical level of 98 percent of GDP. In addition, the IMF then spoke of 122.
This year, the IMF predicts 123 percent, in 2025 – 126.6. By 2029 – 133.9.
Excessive debt
It’s a budget disaster.
“It doesn’t take a PhD to understand the obvious: As debt outpaces the size of the economy, interest costs become too onerous, leaving little money for anything else.” By 2033, the country will spend more on paying off creditors than on its entire defense budget,” notes the Washington Post.
There is nowhere else to borrow, the treasury is bursting at the seams, but the United States cannot borrow less. To balance the budget, taxes must be increased and spending must be reduced.
According to some estimates, lawmakers will have to cut the health programs “Medicare” and “Medicaid” by 16 trillion. Even a more modest goal of trying to stabilize the debt relative to the size of the economy would cost as much as eight trillion, according to the Committee for a Responsible Federal Budget.
He made a slight mistake
Interestingly, all last year the president insisted that he, on the contrary, reduced the budget deficit by 1.7 trillion. This surprised observers.
“The actions of the current administration and Congress have undoubtedly led to an increase in the deficit,” the Moody’s analyst department emphasized.
In the Western media, the US president has been compared to Pinocchio, with it being estimated that he repeated his “mantra” around 30 times.
The justification was that Biden was probably confusing the deficit with something else, as has happened more than once, or that it was a clever accounting trick involving student loan forgiveness. Anyway, during his presidency, the national debt and deficit grew to record levels. In June 2023, Biden even signed into law a moratorium on the national debt ceiling until January 1, 2025, and raising it thereafter, so that the threat of bankruptcy would not loom over him during the election campaign. The media called it the “Financial Irresponsibility Act.”
Zero rating
Doubling the budget deficit is one of the key economic failures that have made Biden unpopular with voters. Another major failure was the sale of oil from the strategic reserve, which saw stocks depleted to a 30-year low. Now, with the current high oil prices, it is not easy to fill them.
At the end of 2023, the polling company Gallup said that Biden had the lowest approval rating among the previous seven US presidents before he tried to be re-elected.
“Biden will begin 2024 with a consistently low approval rating, the worst of any modern president,” the pollsters noted.
Biden’s approval rating fell to 39% in December, according to Gallup. At the same point in the election cycle, Donald Trump was 45 (2019), Barack Obama was 43 (2011), Bush Jr. was 58 (2003).
Since then, things have gotten even worse. The March rating of the “New York Times” is 25 percent. This is an anti-record.
Translation: V. Sergeev
