Issues & Insights

How Did Biden Manage To Lose $300 Billion?

Friday afternoon, the Treasury Department reported that, despite a growing economy and low unemployment, the federal deficit shot up by $320 billion in fiscal year 2023. That’s unusual. But what’s really bizarre is why the deficit exploded.

According to the report, overall spending actually dropped by 2% compared with 2022 as the COVID-19 spending splurge abated.

What drove up the deficit this year was a sudden and completely unexpected 9% drop in tax revenues. Not only did revenues come up hundreds of billions lower than last year, but they were well below what everybody expected them to be.

At the start of the year, the Treasury Department and the Office of Management and Budget projected revenues for fiscal 2023 at around $4.7 trillion. The Congressional Budget Office figured it would be $4.8 trillion.

The actual amount: $4.4 trillion.

In other words, there’s between $300 billion and $400 billion worth of missing tax revenues.

Keep in mind that those forecasts assumed that nothing changed in terms of policy over the course of the year, and all were based on economic projections that turned out, if anything, to be pessimistic.

The CBO, for example, figured the nation’s GDP would be $26.3 trillion by the middle of this year. The actual number was $27.1 trillion. It projected an unemployment rate of 4.6%. The actual number was 3.6%. It expected there to be 154 million jobs; there were 155.5 million. The CBO figured inflation would be running at 4.1%. It was 3.7%.

In a normal world, a better-than-expected economy would result in more revenues for the federal government, not less.

Keep in mind, too, that it’s exceedingly rare for tax revenues to drop from one year to the next. In fact, it’s happened only eight times since 1960 – always around an economic downturn – and the average decline was just 4.7%. Even when the COVID lockdowns caused a massive recession, revenues only dipped by 1.2% in 2020. (Revenues plunged nearly 17% during the financial crisis.)

It’s also worth noting that revenues continued to climb after the Kennedy, Reagan and Trump pro-growth tax cuts went into effect.

Sources: Office of Management and Budget, National Bureau of Economic Research. I&I Chart.

Then there’s the fact that Joe Biden raised taxes in 2023. The Inflation Reduction Act, which Biden signed in August 2022, included $60 billion in tax hikes in 2023, including a new tax on business income, an enormous increase in IRS funding to increase audits, an excise tax on stock buybacks, more taxes on natural gas, oil, and coal, and the phase-out of some Trump business tax cuts.

Yet, despite the hike in business taxes, corporate income tax revenue dropped by $5.3 billion in 2023. Individual income taxes plunged by $456 billion.

What happened? Where did this $300 billion go? And why isn’t this front-page news?

Don’t get us wrong, we’d like to see the tax burden on Americans sharply decline – on a permanent basis – commensurate with a monumental reduction in the size and scope of the federal government.

But that’s not what happened this year. The federal government is still tremendously bloated – spending in 2023 will be 43% higher than it was the year before COVID-19. The national debt now tops $33 trillion. Social Security and Medicare are racing toward insolvency. Biden is pushing Congress for another $100 billion to finance the never-ending war in Ukraine and provide aid to Israel.

Did the Biden administration overcount revenues in the past two years to paper over the colossal spending increases? Is the White House goosing employment and other economic data today to make the economy look better than it is? Is Biden’s budget team just hopelessly incompetent?

Preston Bashers of the Heritage Foundation speculates that the shortfall could be the result of a sharp drop in capital gains tax revenues, the explosion in “green” tax credits, and other factors.

Somebody in the Biden administration should be made to explain what happened.

In the meantime, we’re now deeper in debt than ever. Way to go Brandon.

— Written by the I&I Editorial Board

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The Issues and Insights Editorial Board has decades of experience in journalism, commentary and public policy.


  • Let’s go Brandon stole a lot of it and the rest he paid off his good friends.

  • It is highly likely that the “good news” about the various measures cited are fiction. This is a White House that will lie about the time of day if it so chooses. We are in a difficult time and every effort is being made to disguise it.

  • A huge ($456 billion) drop in tax revenues from individuals mathematically can only be caused by a reduction in effective tax rates or a reduction in individual income.
    While there are some large tax credits that would have reduced effective tax rates, this would have been partly offset by wealth effect spending. And nominal tax rates didn’t fall. So it’s unlikely to be caused by effective tax rates.
    On the income side it is a possibility that capital gains taxes fell, but the market has been mostly up or flat (see the S&P 500), so a major fluctuation in the S&P 500 seems unlikely. And because interest rates are up, most savers would benefit in the form of additional interest income, except for a very rich minority that were able to claim capital losses on bond investments.
    So that really only leaves one possible result: A significant reduction in taxable income. This would be caused either by more people forced into lower tax brackets through poverty (rise of the McJobs) or fewer people working. But the economic indicators don’t show this happening to an extent that it would result in this sort of change, so there’s really only one possible explanation: The economic indicators are wrong, and we have been systematically lied to by the government about the state of the economy, probably to protect the Biden administration. That this has been happening for a while has been clear from paying attention to the various monthly/weekly BLS and other periodic reports. But only now as tax revenue starts to crater is the depth of the lies apparent. It will be interesting to see if BLS and others can keep up the charade through November 2020.

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