National deficit, inflation rise despite 'Inflation Reduction Act'
(The Center Square) – The U.S. Congressional Budget Office reports that the federal government is borrowing far more this fiscal year than the year before even as inflation continues to rise.
The CBO released its deficit estimate which said the U.S. deficit hit about $1.5 trillion in the first 11 months of this fiscal year.
"Eleven months in, and we have already borrowed $1.5 trillion this fiscal year, compared to $946 billion at the same point last year," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement. "On top of that dismal fiscal news, we still haven’t funded the government past the end of the month – Washington appears to be sticking to its time-honored tradition of governing poorly, and by perpetual crises."
The cost of interest payments on the national debt will surpass the cost of U.S. funding for national defense within a decade. In fact, federal spending projections show that interest payments on the national debt will soon become the federal government’s largest expense.
On top of that, Medicare, Social Security and highways will face insolvency within a decade.
Unless Congress enacts significant changes, the deficit and debt are expected to continue rising.
"The deficit is on track to be double what it was last year after excluding the effects of the President’s overturned student debt cancellation plan," MacGuineas said. "That is doubly disturbing given that the economy is growing and unemployment remains low; usually the deficit shrinks, not grows, during economic expansions. It’s just another sign of the deteriorating fiscal conditions of the federal budget and the immense challenges we face in turning the tide towards fiscal sustainability."
The House Subcommittee on Health Care and Financial Services held a hearing this week on the Inflation Reduction Act where Republicans raised concerns about rising deficits, which are helping fuel inflation. Federal debt spending is partially offset by printing money, which increases inflation.
"Not only does the IRA do little to reduce inflation, but it will continue to add to the deficit with rampant spending," the subcommittee’s Chair Lisa McClain, R-Mich., said during the hearing.
Meanwhile, federal inflation data released this week showed a major spike in prices in August. The U.S. Bureau of Labor Statistics released its Consumer Price Index and Producer Price Index, key markers of inflation, which showed spikes of 0.6 percent and a 0.7 percent spike, respectively, much higher than expected.
Those increases bucked the trend of slowing inflation seen earlier this year.
"The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase," BLS said of its consumer prices. "Also contributing to the August monthly increase was continued advancement in the shelter index, which rose for the 40th consecutive month. The energy index rose 5.6 percent in August as all the major energy component indexes increased. The food index increased 0.2 percent in August, as it did in July."