America’s federal budget deficit will rise to $1.8 trillion in fiscal year 2024, the highest level in three years, according to new estimates from the Congressional Budget Office released Tuesday.
The increase from last year’s $1.7 trillion deficit comes as tax revenues have not kept pace with rising costs of government programs and rising interest rates on government bonds.
The numbers demonstrate the continuing fiscal strain facing the U.S. economy, as the national debt approaches $36 trillion. Despite steady economic growth and low unemployment, the annual deficit is widening again after falling from pandemic-era highs. According to the CBO, the U.S. recorded a surplus of $63 billion in September, the final month of the fiscal year.
The United States’ dependence on borrowing to fund its priorities and pay its bills is not expected to end anytime soon. Vice President Kamala Harris and former President Donald J. Trump have both proposed policies that, if passed, would cost trillions of dollars more over the next decade. Much of that expenditure is expected to be covered by borrowings.
The bipartisan Federal Budget Responsibility Committee, which seeks to reduce the deficit, predicted in a report this week that Mr. Trump’s various plans could cost up to $15 trillion over 10 years. Harris’ economic plan could cost as much as $8 trillion.
Harris said she would finance her agenda by raising taxes on the wealthy and big corporations. Mr. Trump has promised to pay the price by cutting government waste and stimulating stronger economic output.
The fate of these plans will depend on the composition of Congress. But regardless of who wins and who controls the House and Senate, the next president will have to grapple with key fiscal decisions about raising the nation’s debt ceiling, which has been suspended until January. The next president will also face a major battle over whether to extend Trump’s 2017 tax cuts, many of which are set to expire next year. Budget estimates suggest that extending all expired provisions would cost $5 trillion over 10 years.
Official deficit figures for the financial year are expected to be released by the Treasury in the coming weeks. The numbers have been obscured in recent years by strange accounting practices related to the student loan forgiveness program that President Biden proposed in 2022 and was later struck down by the Supreme Court. The budget office noted that without the budget effects of reversing the plan, the federal deficit in 2024 would have been $110 billion lower than in 2023.
Although the budget deficit estimate announced by the Bureau of Accounting is smaller than expected at the beginning of this year, the fiscal situation remains dire. High interest rates are raising the cost of repaying government loans. Securing federal spending has also been difficult, in part because the costs of some government programs have exceeded initial expectations.
The Internal Revenue Service has paid out more than $200 billion related to pandemic-era benefits known as the Employee Retention Tax Credit. When the program was first enacted in 2020, it was expected to cost the federal government $55 billion over 10 years. Additionally, the Inflation Control Act, which was originally heralded as costing less than $400 billion over 10 years, is now expected to cost more than $1 trillion by some economists.
The federal government will spend $6.8 trillion in 2024, a 10% increase from the previous year. The main reason for this was that interest costs increased by $240 billion due to high interest rates, an increase of 34% from the previous year. Spending on Social Security and Medicare benefits also increased significantly.
White House officials blamed tax cuts passed by Republicans in 2017 for increasing the national debt, noting that Biden’s latest budget plan would reduce the deficit by $3 trillion over 10 years. The official also noted that the annual deficit is smaller than it was when Biden took office. The budget deficit peaked at $3.1 trillion in fiscal year 2020.
Budget analysts and fiscal hawks say lawmakers of both parties are not taking the nation’s debt seriously enough and that continuing to ignore the issue could lead to automatic cuts in social safety net benefits and slowing economic growth. They are warning with increased vigilance that there is a possibility of a connection.
“Rising interest costs and our nation’s structural deficits are driving the nation’s debt ever higher, with significant implications for America’s future,” said Michael Peterson, chief executive of the Peter G. Peterson Foundation. “It is clear that this is a fiscal election that will give us the best of both worlds.” Fiscal restraint. “The leaders we elect this fall will face a series of important deadlines, including reinstating the debt ceiling, expiring trillions of dollars in tax cuts, and automatically cutting Social Security.”
