The federal government's budget deficit was nearly $2 trillion last year and is expected to widen further in future years, with experts warning that the government needs to rein in deficits to ensure fiscal stability.
The nonpartisan Congressional Budget Office (CBO) released its preliminary estimated deficit for fiscal year 2024, which was $1.834 trillion. The FY2024 deficit was $139 billion larger than the actual deficit recorded in the prior fiscal year, as spending growth eclipsed the rise in tax revenue.
Based on the preliminary estimate for the FY2024 deficit, it ranked as the third-largest budget deficit in U.S. history. It trails only the $3.132 trillion deficit in FY2020 and the $2.775 trillion deficit in FY2021, each of which were incurred amid elevated federal spending on pandemic relief programs.
The deficit's growth comes amid rising federal spending on entitlement programs like Social Security and Medicare amid the aging of America's population, as well as higher interest payments on the debt caused by elevated interest rates and a growing national debt.
Spending on net interest payments on the debt rose by $240 billion in FY2024 compared to last year, according to the CBO's estimate. Social Security spending was up $107 billion and Medicare rose $25 billion from a year ago.
"With one fiscal year ending and another starting anew, it's clear that we have a lot of course correcting to do," said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget (CRFB). "We're now borrowing $5 billion per day, while interest payments are soaring."
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"At nearly $2 trillion, last year's deficit was almost double pre-pandemic levels. We face massive headwinds with debt set to reach an all-time record share of the economy by 2027; and we don't even have a plan to address our fiscal challenges," she said.
"As rising interest costs and our structural deficits drive the national debt higher and higher, it's clear that this is a fiscal election with enormous implications for America's future," said Michael Peterson, CEO of the nonpartisan Peter G. Peterson Foundation.
Deficits are projected to continue to widen in the years ahead. The CBO projected that deficits are on track to surpass $2 trillion a year starting in FY2030 and will be nearly $2.9 trillion just four years later.
The economic plans released to date by the two leading presidential contenders, Vice President Harris and former President Trump, have each been projected to cause the deficit to widen at a faster pace and opted against addressing the looming insolvency of a key Social Security trust fund in the next decade.
An analysis by CRFB found that Harris' economic plan would likely result in deficits being $3.5 trillion larger over the 2026-2035 period, while Trump's plan would widen deficits by $7.5 trillion in that period.
"We cannot afford to continue to borrow at this rate indefinitely. It is long past time that policymakers stop adding to our growing national debt and instead agree on a path forward that puts the debt on a downward, sustainable path for future generations," MacGuineas explained.
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"The leaders we elect this fall will face a series of critical deadlines, including the return of the debt ceiling, the expiration of trillions in tax cuts, and automatic cuts in Social Security growing ever closer. Voters are taking notice and want to hear about fiscal solutions, but unfortunately we have yet to see adequate plans from either of the presidential candidates," Peterson added.
