Can’t Accumulate Debt Indefinitely: U.S. Budget Deficit Doubles as Hundreds of Billions of Dollars to Allocated to Finance New War Efforts

The United States Treasury Department’s latest figures released in the penultimate week of October have revealed that the country’s budget deficit has more than doubled, reaching $2.02 trillion for the fiscal year through September compared to just $1 trillion for the preceding year. This was reported one day before President Joe Biden requested that the U.S. Congress finance another foreign military aid budget intended primarily to support the Ukrainian war effort against Russia, which has cost the United States and its allies hundreds of billions of dollars since February 2022. The $106 billion emergency foreign military aid budget will see 58 percent, or $61.4 billion, allocated to Ukraine, while $14.3 billion more will be sent to Israel to support its military operations against the Palestinian militia Hamas. Tying the two packages together has been widely considered by analysts as a means of getting past opposition from Republican congressmen to further funding to Ukraine. The request has also closely coincided with revelations that the CIA has been separately heavily financing Ukraine’s intelligence services with tens of millions of dollars to enhance its wartime capabilities. 

Concerns have been widely raised the West that the outbreak of war in the Middle East will divert attentions away from the Ukrainian front, although unlike in Ukraine the United States and its allies have indicated a much greater willingness to get involved directly should the conflict expand to include parties beyond Israel such as the Lebanese militia Hezbollah or Iran’s armed forces. This would allow the bulk of the war effort to be funded through the Pentagon budget rather than through foreign aid packages, with increases to defence spending when American personnel are in the firing line expected to be considerably less controversial but likely even more damaging to the federal budget deficits.

As budget deficits have continued to grow more extreme, annual interest payments on debt are set to surpass the entire Pentagon budget well before 2030. With the United States having come increasingly close to defaulting, and growing numbers of countries looking to diversify their trade and reserves away from the dollar to insulate themselves from potential risks, the U.S.’ ability to maintain stability in its economy, the position of its currency and particularly its government spending levels has increasingly been brought to serious question. This looming reality of a collapse or else of extreme budget cuts has far reaching consequences for defence, and has the potential to have a transformative effect on areas ranging from the standing of the tech sector to continued funding for personnel salaries and arms acquisitions.