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A new report from the International Monetary Fund explains how serious the hole the United States has dug itself in terms of the federal deficit is and how steps must be taken now to mitigate it.
“Crisis-era support measures should “The political budget cycle and the trend to further increase spending must immediately end,” IMF economists say in the report “Fiscal Policy in the Big Election Year.” “Reforms are needed to contain growing pressures on spending, for example, through social benefit reforms in advanced economies with aging populations and improving the targeting and efficiency of social safety nets to support populations.” most vulnerable.
The IMF notes that by 2029, global public debt is projected to approach 99% of GDP, driven primarily by the policies of the United States and China.
Courtesy of the IMF
“Lax fiscal policy and rising debt levels, as well as tightening monetary policy, have contributed to rising long-term government yields and their greater volatility in the United States, increasing risks elsewhere through the effects of interest rate contagion,” according to The report.
based on data from the US Department of the Treasury.The federal government has a $1.1 trillion deficit so far in fiscal year 2024, which began Oct. 1, 2023.
Courtesy of the Bipartisan Policy Center
In fiscal year 2023, the deficit amounted to $1.7 trillion, which was $320 billion more than in fiscal year 2022.
On April 19, the 10-year bond yield closed around ~4.6%. On January 2, the first trading day of 2024, it closed at ~3.9%. That makes paying down the debt more costly for the federal government.
A recent blog post from the Committee for a Responsible Federal Budget found that spending to pay down debt in the first half of fiscal year 2024 already amounts to $429 billion, an amount equal to 39% of the individual income tax paid in so far this year. And that figure is expected to reach $870 billion by the end of the year.
“At this level, interest payments Overspending on both defense and Medicare. this year and rise to become the second most important item in the budget,” he blog post readings.
Courtesy of the Committee for a Responsible Federal Budget
In March, President Biden Announced a budget plan that includes cutting $3 trillion from the deficit over 10 years, primarily by raising taxes on the wealthy and corporations.
However, Biden has not reduced spending either. Early in his presidency, he pushed through a $1.7 trillion stimulus package that led to a $2.7 trillion deficit in fiscal year 2021, according to one report. axios report. In fiscal years 2022 and 2023, the deficits were, respectively, $1.4 trillion and $1.7 trillion.
During his presidency, President Trump saw deficits grow immensely, a result of COVID-19 spending and major tax cuts, primarily for corporations and the wealthy. The deficit was $3.1 trillion in fiscal year 2020, compared to $984 billion in fiscal year 2019, per Data from the Congressional Budget Office.
In Trump's first full fiscal year in office (fiscal year 2018), the federal deficit was $779 billion. However, that was $113.3 billion more than in fiscal 2017, according to the Treasury Department report. Fiscal Service Office.
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