The U.S. Treasury Department released new figures related to the 2023 budget on Friday. These figures showed a troubling drop in the nation’s tax revenue compared to GDP, which fell to 16.5% despite a growing economy. Additionally, there was an annual deficit increase that essentially doubled from the previous year.
The Washington Post reports that this increase in the deficit is unexpected. After record U.S. government spending in 2020 and 2021 due to programs related to the economic fallout from the Covid-19 crisis, the deficit dropped from close to $3 trillion to close to $1 trillion in 2022. However, instead of continuing to fall to its pre-pandemic levels, the deficit jumped this year to roughly $2 trillion.
The reporting on the Treasury figures suggests various factors contributing to the surge in the deficit. These include higher payments on debt due to interest rates, tax filing waivers related to extreme weather events, the impact of a student loan forgiveness program that was later rescinded, or a dip in capital gains receipts. However, progressive tax experts argue that the heart of the budget problem lies in tax giveaways to the rich.
Bobby Kogan, senior director for federal budget policy at the Center for American Progress, attributes the growing deficits in recent years to Republican tax cuts benefiting the wealthy and profitable corporations.
Regarding the Treasury figures released Friday, Kogan states that roughly 75% of the surge in the deficit and the debt ratio is due to revenue decreases resulting from GOP-approved tax cuts over recent decades. He adds that more than half of the remaining 25% is higher interest payments on the debt related to Federal Reserve policy.
To visualize the growing debt ratio, Kogan offers a chart showing recent and projected levels of federal revenue and spending relative to gross domestic product (GDP).
In a detailed analysis produced in March, Kogan explains that without the Bush and Trump tax cuts, revenues would be on track to keep pace with spending indefinitely, and the debt ratio would be declining. These tax cuts have added $10 trillion to the debt since their enactment and are responsible for 57 percent of the increase in the debt ratio since 2001.
In response to the Treasury report, Sen. Sheldon Whitehouse’s office cites the same numbers, stating that tax giveaways for the wealthy have added $10 trillion to the debt and account for 57 percent of the increase in the debt-to-GDP ratio since 2001. They argue that without these tax cuts, U.S. debt would be declining as a share of the economy.
Sen. Whitehouse, chair of the Senate Budget Committee, attributes the dip in federal revenue and the growth in the overall deficit to GOP fealty to wealthy individuals and powerful corporations. He suggests that fixing the corrupted tax code and cracking down on wealthy tax cheats would help bring down the deficit and promote a stronger economy for all.
None of the latest figures should come as a surprise. In 2018, shortly after the Trump tax cuts were signed into law, a Congressional Budget Office (CBo) report predicted the resulting plummet in revenues and the growth of annual deficits, despite promises of economic growth by Republicans.
Despite the evidence, the GOP majority in the U.S. House still plans to extend the Trump tax cuts. A CBO analysis found that such an extension would add an additional $3.5 trillion to the national debt.
Sen. Whitehouse states, “Republicans racked up the national debt by giving tax breaks to their billionaire buddies, and now they want everyone else to pay for them.” He criticizes the Republicans for simultaneously using the deficit to extort massive spending cuts to critical programs while supporting a bill that would blow up deficits to extend trillions in tax cuts for the wealthy.
