The Treasury Department announced on Friday that the Biden administration recorded a budget deficit exceeding $1.8 trillion in fiscal 2024, marking an increase of over 8% from the previous year and ranking as the third highest deficit on record.
Despite a small surplus in September, the total shortfall amounted to $1.833 trillion, which was $138 billion higher compared to the previous year. The only years that witnessed larger deficits were 2020 and 2021 when the U.S. government allocated trillions towards expenses related to the Covid-19 pandemic.
The deficit persisted even with record receipts of $4.9 trillion, falling significantly short of the $6.75 trillion in outlays. The government’s debt has surged to $35.7 trillion, rising by $2.3 trillion from the conclusion of fiscal 2023.
One contributing factor to the debt and deficit scenario has been the elevated interest rates resulting from the Federal Reserve’s series of rate hikes aimed at combating inflation. The interest expense for the year reached $1.16 trillion, surpassing the trillion-dollar mark for the first time. Net of interest earned on government investments, the total interest expenditure was a record $882 billion, ranking as the third-largest outlay in the budget, exceeding all other expenses except for Social Security and healthcare.
The average interest rate on all government debt in 2024 was 3.32%, up from 2.97% in the previous year, as stated by a Treasury official. In September, the government achieved a surplus of $64.3 billion, partly due to calendar effects that shifted benefit payments into August, which experienced a $380 billion deficit, the largest monthly deficit of the year.
The deficit, as a percentage of the total U.S. economy, is currently exceeding 6%, a historically unusual occurrence during an economic expansion and well above the 3.7% average over the past 50 years, according to the Congressional Budget Office. The CBO anticipates that deficits will continue to rise, reaching $2.8 trillion by 2034. Regarding the debt, the office projects an increase from the current level near 100% of GDP to 122% by 2034.
