The Biden administration recorded a budget deficit exceeding $1.8 trillion in fiscal year 2024, marking an increase of over 8% from the prior year and ranking as the third largest on record, according to the Treasury Department’s announcement on Friday.
Despite achieving a modest surplus in September, the overall shortfall amounted to $1.833 trillion, which is $138 billion more than the previous year. This significant deficit is only surpassed by the years 2020 and 2021, when the government spent trillions due to the Covid-19 pandemic.
The deficit occurred in spite of record revenue collections of $4.9 trillion, which were insufficient to cover expenditures amounting to $6.75 trillion.
The government’s debt has expanded to $35.7 trillion, reflecting an increase of $2.3 trillion from the conclusion of fiscal year 2023.
High interest rates, resulting from the Federal Reserve’s series of hikes intended to combat inflation, have exacerbated the debt and deficit situation.
Interest expenses for the year reached $1.16 trillion, marking the first time this figure surpassed the trillion-dollar mark. After accounting for interest earned on government investments, the net total was a record $882 billion, making it the third-largest expenditure in the budget, behind only Social Security and health care.
For 2024, the average interest rate on government debt was 3.32%, compared to 2.97% the previous year, as stated by a Treasury official.
A government surplus of $64.3 billion was recorded in September, partly due to timing effects that shifted benefit payments to August, which had a $380 billion deficit, the largest monthly deficit of the year.
Relative to the total U.S. economy, the deficit is running above 6%, an unusual figure historically during periods of expansion and significantly higher than the 3.7% historical average over the past five decades, according to the Congressional Budget Office (CBO).
The CBO projects that deficits will continue to increase, reaching $2.8 trillion by 2034. Regarding debt, the office anticipates it will rise from the current level near 100% of GDP to 122% by 2034.
