The U.S. Treasury Department announced today that the federal budget deficit for fiscal year 2024 surged to $1.833 trillion, marking an 8% increase from the previous year and the third-highest deficit on record. This substantial shortfall comes as rising interest rates on national debt have pushed interest expenses past the $1 trillion mark for the first time in history.
Despite a modest $64.3 billion surplus in September, the annual deficit swelled by $138 billion compared to the $1.695 trillion recorded in 2023. The only larger deficits in U.S. history occurred in 2020 and 2021, when the government engaged in massive spending to combat the economic fallout from the COVID-19 pandemic.
The fiscal 2024 budget numbers reflect a significant imbalance between record receipts and spending. The U.S. government collected $4.9 trillion in revenue, but outlays totaled a staggering $6.75 trillion, leading to the substantial deficit.
Debt Burden and Interest Expenses Reach Record Levels
The national debt has ballooned to $35.7 trillion, an increase of $2.3 trillion since the end of fiscal 2023. A major contributor to this growing debt burden is the rise in interest rates, driven by the Federal Reserve’s efforts to combat inflation. Interest expenses for the year topped $1.16 trillion, crossing the trillion-dollar threshold for the first time. After accounting for interest earned on government investments, net interest outlays still reached a record $882 billion, making it the third-largest item in the federal budget, behind only Social Security and healthcare.
The average interest rate on the national debt increased to 3.32% in 2024, up from 2.97% in 2023, further exacerbating the deficit.
An Ongoing Challenge for the U.S. Economy
As a percentage of the total U.S. economy, the budget deficit now stands above 6% of GDP, far exceeding the historical average of 3.7% over the past five decades. This level is particularly concerning during a period of economic expansion, when deficits are typically lower.
Looking ahead, the Congressional Budget Office (CBO) projects that the budget deficit will continue to rise in the coming years, reaching an estimated $2.8 trillion by 2034. The national debt is expected to grow from its current level near 100% of GDP to 122% by 2034, placing further strain on the federal budget.
Key Figures:
- Deficit for fiscal 2024: $1.833 trillion
- Revenue: $4.9 trillion
- Outlays: $6.75 trillion
- National Debt: $35.7 trillion
- Interest Expense: $1.16 trillion
- Net Interest: $882 billion
- Average Interest Rate on Debt: 3.32%
As policymakers continue to grapple with high interest rates, ballooning debt, and rising deficits, experts warn that additional fiscal measures may be needed to stabilize the nation’s financial outlook and ensure sustainable economic growth.