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Federal Budget for FY23

September 1, 2023
Federal Budget for FY23

[Understand the federal debt limit and the potential economic consequences.]

Congress passed the $1.7 trillion federal budget for FY23 on Dec. 23, 2022, which is the same day that the continuing resolution (CR) was set to expire. If the omnibus had not passed by then, a government shutdown would have occurred.

President Biden’s FY23 budget aimed to expand economic progress by investing in bipartisan priorities – such as infrastructure, education, nutrition, and affordable housing – while also seeking to reduce the federal deficit by more than $1 trillion over the next decade.

Mandatory and discretionary spending

The FY23 budget included $927.5 billion for mandatory entitlements, $772.5 billion for nondefense discretionary programs, and $858 billion for defense programs, with $44.9 billion allocated for Ukraine.

Mandatory spending on entitlement programs, such as Social Security and Medicare, was a topic of debate leading up to the passage of the FY23 omnibus. There continue to be long-term concerns about the stability of these federal programs. In early 2023, these concerns came to a head, with the federal government coming up against the $31.4 trillion debt ceiling.

Due to the rising federal debt, Congress heatedly debated the discretionary side of the FY23 ledger. Some Republicans proposed slowing or reversing nondefense spending in areas such as Social Security, Medicare, Medicaid, and other such programs. Previously, caps were placed on defense and nondefense spending. But those caps steadily increased over time and have always increased together.

Spending debates loom over the passage of Biden’s FY24 budget. Just like with the FY23 budget, Biden’s FY24 budget aims to reduce the federal deficit by taxing corporations and high-income earners. However, many House Republicans reject tax increases and request spending cuts, instead of raising the debt ceiling. Democrat leadership, on the other hand, advocate for a “clean” raise of the debt limit, meaning without cuts. During late May 2023, Congress passed a debt ceiling package that suspends U.S. borrowing until 2025.


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FY23 funding priorities

Although the deficit fell by $300 billion in 2022, the national debt hit a record-breaking high. To ensure that the U.S. does not default on their debts, Biden’s FY23 budget has deficit-reducing goals, such as making corporations and wealthy American pay their fair share of taxes as well as preventing multinational enterprises from utilizing tax havens. Doing so could reduce the deficit by over $1 trillion over the next 10 years, according to the Biden Administration.

FY23 policy priorities

Climate crisis

$18 billion of the FY23 budget went toward climate projects spearheaded by many federal agencies, including $3.35 billion for the Department of Homeland Security, $5.9 billion for the Department of Interior (DOI), $1 billion for Department of Housing and Urban Development (HUD), and more.

Funds from the FY23 budget supported federal programs in clean energy infrastructure and innovation, provided resources to reduce greenhouse gas emissions, scaled up clean energy equipment, increased investments in zero-emission fleet vehicles, and bolstered frontline defenses against catastrophic wildfires, among many other environmental initiatives.

Mental health and cancer

To address mental health crises exacerbated by the pandemic, the FY23 budget required all private health insurances to cover mental health, substance abuse, and behavioral disorders. The budget also lowered costs for those who are on TRICARE or Medicare, increased mental health providers for Medicare beneficiaries, and increased investments in youth mental health and suicide prevention programs.

Funds were also given to the Advanced Research Projects Agency for Health (ARPA-H), the Center for Disease Control and Prevention (CDC), and the Food and Drug Administration (FDA) to reduce the cancer mortality rate by 50 percent over the next two decades and offer support to those who currently have cancer.

Domestic manufacturing

To strengthen domestic supply chains and manufacturing, $372 million of the FY23 budget was designated to the National Institutes of Standards and Technology (NIST) to launch two new manufacturing programs and support two additional ones.

This includes NIST’s Manufacturing Extension Partnership (MEP), which offers resources to small and mid-sized manufacturers to stay competitive and grow. And $200 million of the FY23 budget went to the Department of Energy’s (DOE) efforts to bolster domestic solar energy supply chains, instead of relying on imported products.

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