The deficit is the third highest in US history after the 2020 and 2021 records linked to the Covid crisis.
The US budget deficit widened sharply in 2024 as additional tax revenue was not enough to cover the sharp increase in debt service during a period of high interest rates, an announcement that comes less than three weeks before the election. At the end of the 2024 fiscal year, which ended Sept. 30, the deficit was 6.4% of gross domestic product (GDP), compared with 6.2% in 2023, the finance ministry announced on Friday. It thus amounts to 1,833 billion dollars, an increase of 8% compared to the previous year. This is the third highest amount in US history after the 2020 and 2021 records linked to the Covid crisis. The accounts of the world’s largest economy were then weighed down by the explosion in public spending.
In 2022, however, the deficit was largely reduced. But it started to rise again in 2023 and then in 2024 under the influence of the high interest rates that had to be paid in the face of the staggering US debt. “The Biden-Harris administration remains focused on the long-term growth of our economy with historic investments in infrastructure, manufacturing and clean energy while considering our long-term economic outlook”commented Treasury Secretary Janet Yellen, quoted in the press release. The country’s fiscal situation is a major issue in the Nov. 5 election, and both camps accuse each other of having policies that will further increase the debt.
In less than three weeks, voters will have to choose between the Democratic nominee and Joe Biden’s vice president, Kamala Harris, and the former Republican president, Donald Trump. A Biden administration official lamented that congressional Republicans were “responsible for tax cuts that led to lower income levels, increased debt”and that they “Continue to call for massive tax cuts”.
The American deficit close to the French deficit
In detail, revenue from October 2023 to September 2024 increased by 11% to $4.919 billion. Taxes paid by US households were actually higher than in the previous year as their economic situation improved due to rising employment and wages, a Treasury secretary told reporters. Expenses increased by 10% to DKK 6,752 billion. This is mainly due to the almost one-third increase in debt service, while interest rates were at their highest level since the early 2000s. However, the US Federal Reserve (Fed) began cutting interest rates in September and is expected to continue momentum in the coming months, encouraged by easing inflation.
In June, the Congressional Budget Office (CBO) predicted a deficit of $1.9 trillion for 2024. This independent body responsible for providing the US Congress with budgetary and economic analysis also predicted that it would then increase more than expected in over the next ten years, driven by the cost of debt interest and aid to Ukraine. But he also estimated that immigration would inflate GDP by $8.9 trillion over the period. The US government deficit as a percentage of GDP is close to France’s, which stood at 6.1% in 2024, well above the European ceiling of 3%. This landed France in an EU procedure for excessive deficits, with six other countries having exceeded the 3% set in the Stability Pact last year. They must take corrective action under penalty of financial penalties. The French government has set itself the goal of reducing it to 5% by 2025, which represents an effort of several tens of billions of euros.
