When it comes to the size of the federal government’s annual deficit, appearances can be deceiving. Rather than update last year’s deficit numbers, though, the Treasury recorded the changes as a $333 billion spending cut in August 2023. Without the student-debt-cancellation proposal muddling the numbers, the deficit for fiscal year 2022 would have been smaller than originally reported, around $1 trillion. That is inflaming longstanding debates in Washington about the federal budget, which is already under pressure from higher interest rates. Another important factor in the federal budget is higher interest rates, a result of the Federal Reserve’s effort to tame inflation.

Source: Wall Street Journal October 12, 2023 13:46 UTC