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The numbers: The U.S. federal budget deficit widened to $314 billion in November, up from $249 billion in the same month last year, the Treasury Department said Tuesday.
Economists surveyed by the Wall Street Journal had expected the deficit to increase to $290 billion.
For the first two months of the fiscal year, the deficit widened to $381 billion, up from $336 billion in the same period last year.
Key details: In November, government receipts rose, but spending increased at a faster pace, the department said.
Receipts were up $23 billion to $275 billion from a year ago, while outlays rose $88 billion to $589 billion.
Interest on the federal debt was $66.3 billion higher over the first two months of the fiscal year than in the same period a year earlier. The Federal Reserve’s rapid increase in interest rates is leading to higher interest payments.
Net interest costs hit $659 billion in the last fiscal year, having nearly doubled in three years.
Big picture: Economists are worried about the high levels of the deficit, especially given the relatively healthy economy.
The deficit for all of fiscal year 2023, which ended on Sept. 30, was $1.7 trillion. Experts project the size of the deficit to remain close to $2 trillion per year for the next decade, if no legislative changes are enacted.
Federal debt held by the public rose by $2 trillion, to $26.3 trillion, in the last fiscal year.
Interest groups that have been pressing for a reduction in the deficit have been urging Congress to set up a fiscal commission to explore reforms.
Katherine Judge, an economist at CIBC Capital Markets, said higher-than-expected spending isn’t to blame. Rather, the big surprise has been the lack of revenue flowing to the government.
Two rounds of tax cuts have kept revenue weaker as a share of gross domestic product than was projected.
What are they saying? “Not too long ago, a $300 billion to $500 billion deficit for the year would have been alarming,” said Chris Low, chief economist at FHN Financial.
“It is an election year. Maybe we should not be surprised budget discipline is dead. Nevertheless, those are shockingly big numbers, especially after the huge increase in the deficit last year,” he said.
While it is not a crisis yet, CIBC’s Judge said, “there’s certainly the risk of one well out in the future.”
Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose to 4.21%. Stocks were higher, with the Dow Jones Industrial Average
DJIA
up 107 points, or 0.3%.
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