The federal budget deficit rose to $1.8 trillion for fiscal 2024, ending in September, the Treasury Department announced Friday, a warning about the government’s finances that comes amid an election in which both major candidates have sketched out plans that would accelerate the accumulation of debt.
The Treasury said the shortfall was $138 billion higher than the $1.7 trillion notched during the previous fiscal year.
The deficit is the third largest in history, behind only those registered during the pandemic years. It is particularly large for a year in which the government was not financing a major war or counteracting a recession, signaling the long-running mismatch between spending and taxation.
As a percentage of GDP, the deficit was 6.4% during this fiscal year, a slight increase from the 6.2% notched in fiscal 2023.
More ominously, the deficit reflected $882 billion in spending on the interest on the federal debt — more than was spent on national defense in the year. That is an increase of 29% from the year before, and interest costs are expected to rise in the years ahead.
The government collected $4.9 trillion in tax revenue but spent more than $6.8 trillion. Spending rose 7% for Social Security and 6% for defense.
Additionally, the Treasury projected that the fiscal 2025 deficit would rise to just under $1.9 trillion, although much of that will depend on how the elections turn out in November.
“The U.S. economy continued to demonstrate its strength and resilience in 2024, with inflation having fallen more than two thirds from its peak while the labor market remains strong,” Treasury Secretary Janet Yellen said. “The Biden-Harris Administration remains focused on our economy’s long-term growth, which includes sustaining historic investments in infrastructure, advanced manufacturing, and clean energy while also addressing our long-term fiscal outlook.”
Notably, Vice President Kamala Harris and former President Donald Trump have both stitched together economic agendas that would add to the national debt by varying degrees.
The increase in the federal deficit these past two years is a reversal from 2022 when deficits decreased as the government spent less on pandemic relief. During the pandemic, deficits swelled massively as the government approved several rounds of massive stimulus packages that gave money directly to people and businesses.
Rising deficits, which represent the differences between spending and revenues in one year, and the ballooning federal debt, which represents accumulated deficits, present a major challenge to the country.
The national debt is now about $35.8 trillion, which equates to over $100,000 in debt per U.S. citizen. The estimated debt has increased by more than $7.6 trillion, or 27%, since President Joe Biden entered office.
Since the crush of government spending under Trump during the worst of the pandemic, the national debt has exploded by 54%.
Over the past decade, markets have absorbed massive amounts of debt issued by the Treasury without trouble. However, in recent years, interest rates have risen steeply, making debt much more costly to issue.
It’s unclear when more serious problems might arise from running sustained major deficits. However, some fiscal deadlines are imposed by the looming expiration of the trust funds for retirement programs. The Medicare trust fund will be exhausted in 2036, and the combined Social Security trust fund will become exhausted in 2035, the programs’ trustees projected in May.
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Neither Harris nor Trump has offered a plan to dig the United States out of the hole of debts and deficits it finds itself in.
The Committee for a Responsible Federal Budget, a nonpartisan group that advocates fiscal restraint, released an analysis of the candidates’ economic plans earlier this month. Harris’s plan is expected to increase the national debt by about $3.5 trillion over the next decade. For context, that would represent a 9.8% increase over the next 10 years. Trump’s plan would add $7.5 trillion to the national debt, a 21% increase through 2035.