U.S. Federal Budget Deficit Narrows in October
The U.S. federal budget deficit for October narrows to $67 billion, with record high government receipts and rising debt interest. Concerns over rising interest rates and a growing deficit remain.
The U.S. federal budget deficit for the month of October has narrowed to $67 billion, compared to $88 billion in the previous year, according to the Treasury Department. This is lower than the forecast of $70 billion made by economists surveyed by the Wall Street Journal.
In October, government receipts reached a record high due to Californians paying their deferred tax bills from earlier this year. The IRS had postponed these payments after severe late winter storms hit the state. Government receipts in October amounted to $403 billion, a significant increase from the prior month's $319 billion.
Government outlays also rose in October, reaching $470 billion compared to the $406 billion spent in the same month last year. Additionally, interest paid on the national debt almost doubled from the previous year, with the Treasury paying $88.9 billion in interest in October, up from $47.6 billion in the same month last year.
The Federal budget has come under scrutiny due to concerns over rising interest rates, a growing deficit, and fears of a government shutdown. Moody's Investors Service recently downgraded the outlook on the U.S. government's ratings to negative, citing high interest rates and political divisions in Congress that prevent meaningful legislation from being passed.
The deficit for fiscal 2023 has increased by 23% to $1.7 trillion compared to the previous year, partly due to higher interest rate payments. The federal debt now stands at $33 trillion. Economists predict that the annual deficit will remain in the $2 trillion range for the foreseeable future.
October marks the beginning of the fiscal year.
According to Mike Pugliese, senior economist at Wells Fargo, large deficits are expected to persist. It is unlikely that significant fiscal consolidation will take place before the 2024 presidential election. Therefore, meaningful efforts towards fiscal consolidation may not occur until 2025 at the earliest.
On Monday, the yield on the 10-year Treasury note (BX:TMUBMUSD10Y) slipped to 4.63% in trading.