The United States Treasury Department has reported that the government registered a $178 billion surplus in April 2023. This figure, however, came in below the expected $235 billion. In the month under review, total receipts amounted to $638 billion, while outlays stood at $426 billion. Comparatively, in April of the previous year, the fiscal surplus was $308 billion, illustrating a decline of more than 42% year on year.
Despite the seemingly good news of a budget surplus, it is crucial to understand how the US federal budget works and the implications of this reported figure. The federal budget, which is crafted by the President and Congress, consists of receipts – primarily taxes collected by the government – and outlays, which represent government spending. When the government runs a surplus, it means that the tax revenues collected over a specified time are more than government spending for that same period.
However, running a budget surplus is not always a positive sign in the long run. Although it may indicate that the government is not overspending, it can also suggest that the government may not be spending enough to stimulate economic growth. Additionally, reducing budget deficits or even achieving a surplus often involves cutbacks in public spending, which can consequently lead to reduced public services and welfare programs that can negatively impact citizens.
Regarding the reported surplus in April, it is essential to view this news in the context of the wider fiscal year 2023 (FY2023). Up to this point, the fiscal deficit has reached $924 billion, translating to a $564 billion increase compared to the same period last year. This means that the cumulative budget position for the government from October 2022 through to April 2023 has been in deficit, with spending surpassing revenues collected.
Referring to the FY2022 budget, the total deficit for the year closed at a staggering $1.3 trillion. This figure was a sheer contrast to the beginning of the 21st century, during which the US enjoyed budget surpluses for several years – a situation that President Bill Clinton had bequeathed to President George W. Bush. However, irresponsible tax cuts, an aggressive foreign policy, and the global financial crisis overturned the surpluses, resulting in budget deficits for the country since 2002.
This history illustrates the trajectory of the US budget over the years, with surplus years transforming into deficit years. This is a pattern that is almost consistent across periods of different party rule. For example, during the Obama administration, the federal deficit spiked to historic levels due to the government’s response to the Great Recession. This required high spending in order to avert a complete economic collapse.
The Trump administration similarly witnessed sizable budget deficits despite the signature tax cut policy. This was mainly because the tax cuts, which aimed to stimulate economic growth, resulted in lower government revenues that did not match the government’s spending requirements. The persistently high budget deficits during the Trump administration culminated in the budget deficit reaching a record $3.1 trillion in 2020.
Under the present administration, the federal budget remains in significant deficits, with the current fiscal year’s deficit already nearing a trillion dollars. As a result, concerns about the mounting US national debt persist, particularly concerning its implications on future generations.
Despite the short-term surplus reported in April, it is crucial not to overlook the broader picture of the US fiscal situation. It is clear that the US government continues to face significant budget deficits year after year, with surpluses being more of an exception than the rule. Consequently, there is a need for fiscal policy reform, with measures such as spending restraint, tax increases, or structural adjustments that result in long-term fiscal prudence and a budget balance that allows for economic growth alongside welfare maintenance.
However, striking this balance is a challenging act that typically involves political trade-offs between various interest groups, budget priorities, and policy strategies. Additionally, critical factors such as economic growth, demographic trends, global economic conditions, and technological advancements all influence the mix of policies that may prove optimal for managing the nation’s budget. Ultimately, achieving a healthy fiscal balance without causing severe economic disruptions or hindering citizens’ welfare requires a mix of sound policy design and efficient implementation.
