New Delhi

The US budget deficit grew to $1.833 trillion for fiscal 2024, the highest outside of the COVID era, as interest on the federal debt exceeded $1 trillion for the first time and spending grew for the Social Security retirement program, health care and the military, the Treasury Department said in a recent note, as detailed in a report by Reuters.

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The Reuters report further elaborated that, the deficit for the year ended Sept. 30 was up 8 per cent, or $138 billion, from the $1.695 trillion recorded in fiscal 2023. It was the third-largest federal deficit in U.S. history, after the pandemic relief-driven deficits of $3.132 trillion in fiscal 2020 and $2.772 trillion in fiscal 2021. 

The fiscal 2023 deficit had been reduced by the reversal of $330 billion of costs associated with President Joe Biden's student loan program after it was struck down by the U.S. Supreme Court. It would have topped $2 trillion without this anomaly. 

The sizable 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 $7.5 trillion in new debt, more than twice the $3.5 trillion envisaged from Harris' proposals

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White House budget director Shalanda Young emphasized the strong growth in the US economy and the Biden administration's investments in clean energy, infrastructure and advanced manufacturing. "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 in a statement, referring to plans by Biden and Harris to raise taxes on these groups.

U.S. receipts for the 2024 fiscal year hit a record $4.919 trillion, up 11 per cent, or $479 billion, from a year earlier, as individual non-withheld and corporate tax collections grew. Fiscal 2024 outlays rose 10 per cent, or $617 billion, to $6.752 trillion.

IMPACT OF INTEREST COSTS

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On the impact of interest costs, the Reuters report stated that the biggest driver of the year's deficit was a 29 per cent increase in interest costs for Treasury debt to $1.133 trillion due to a combination of higher interest rates and more debt to finance. The total exceeded outlays for the Medicare healthcare program for seniors and for defense spending.

Still, 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 in 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 $1.520 trillion, Medicare, up 4 per cent to $1.050 trillion, and military programs, up 6 per cent to $826 billion. Further, for September, the government reported a $64 billion surplus, compared to a $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 $16 billion deficit in September 2024 and the reported receipts were a record for September at $528 billion, up 13 per cent from a year earlier, while outlays were $463 billion, down 27 per cent largely due to the calendar adjustments.