US budget deficit tops US$1.8 trillion in fiscal 2024, third-largest on record
THE US budget deficit grew to US$1.8 trillion for fiscal 2024, the highest outside of the Covid era, as interest on the federal debt exceeded US$1 trillion for the first time and spending grew for the Social Security retirement programme, health care and the military, the Treasury Department said on Friday (Oct 18).
The deficit for the year ended Sep 30 was up 8 per cent, or US$138 billion, from the US$1.7 trillion recorded in fiscal 2023. It was the third-largest federal deficit in US history, after the pandemic relief-driven deficits of US$3.1 trillion in fiscal 2020 and US$2.8 trillion in fiscal 2021.
The fiscal 2023 deficit had been reduced by the reversal of US$330 billion of costs associated with President Joe Biden’s student loan programme after it was struck down by the US Supreme Court. It would have topped US$2 trillion without this anomaly.
The sizeable fiscal 2024 budget gap of 6.4 per cent of gross domestic product, up from 6.2 per cent a year earlier, could pose problems for Vice-President Kamala Harris’ arguments ahead of the Nov 5 presidential election that she would be a better fiscal steward than Republican opponent Donald Trump.
A fiscal think-tank, the Committee for a Responsible Federal Budget, has estimated that Trump’s plans would pile up US$7.5 trillion in new debt, more than twice the US$3.5 trillion envisaged from Harris’ proposals.
White House budget director Shalanda Young emphasised the strong growth in the US economy and the Biden administration’s investments in clean energy, infrastructure and advanced manufacturing.
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“This Administration has done this while maintaining a commitment to fiscal responsibility by ensuring the wealthiest among us and large corporations pay their fair share and cutting wasteful spending on special interests,” Young said, referring to plans by Biden and Harris to raise taxes on these groups.
US receipts for the 2024 fiscal year hit a record US$4.9 trillion, up 11 per cent, or US$479 billion, from a year earlier, as individual non-withheld and corporate tax collections grew. Fiscal 2024 outlays rose 10 per cent, or US$617 billion, to US$6.8 trillion.
Interest costs
The biggest driver of the year’s deficit was a 29 per cent increase in interest costs for Treasury debt to US$1.1 trillion due to a combination of higher interest rates and more debt to finance. The total exceeded outlays for the Medicare healthcare programme for seniors and for defence spending.
But a senior Treasury official said the interest costs as a share of GDP reached 3.93 per cent, below the 1991 record of 4.69 per cent but the highest percentage since 4.01 per cent in December 1998.
The weighted average interest rate on federal debt was 3.32 per cent in September, up 35 basis points from a year earlier, but down from 3.35 per cent from August, marking the first monthly decline since January 2022.
Other drivers of increased outlays for the fiscal year included Social Security, up 7 per cent to US$1.5 trillion, Medicare, up 4 per cent to US$1.1 trillion, and military programmes, up 6 per cent to US$826 billion.
For September, the government reported a US$64 billion surplus, compared to a US$171 billion deficit in September 2023, but the improvement was largely due to calendar adjustments for benefit payments. Without these, there would have been a US$16 billion deficit in September 2024.
Reported receipts were a record for September at US$528 billion, up 13 per cent from a year earlier, while outlays were US$463 billion, down 27 per cent largely due to the calendar adjustments. REUTERS
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