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The United States recorded a budget deficit of $1.8 trillion for the fiscal year ending September 30, marking a significant rise compared to the previous year, largely due to increased spending, including higher interest payments on public debt, according to the Treasury Department.
This $138 billion increase from 2023 pushes the deficit to its third-highest level in history, trailing only the deficits recorded during the pandemic years of 2020 and 2021.
In 2020, the deficit hit an all-time high of $3.1 trillion as the government boosted spending to mitigate the effects of the COVID-19 pandemic. For the latest fiscal year, the Treasury highlighted a near 30% jump in interest payments on public debt, reaching over $1 trillion, fueled by higher interest rates.
Additionally, the widened deficit was partly attributed to a reversal of more than $330 billion in costs from the previous year, following the Supreme Court’s decision to strike down President Joe Biden’s student loan forgiveness plan. Spending also surged in areas such as Social Security and defense.
On the revenue side, increased collections from individual and corporate income taxes contributed to higher receipts, though these remain below historical averages as a share of GDP, according to the Treasury and the Office of Management and Budget (OMB).
As a percentage of GDP, the deficit rose to 6.4%, up from 6.2% in the previous fiscal year. Meanwhile, borrowing from the public increased by $2 trillion, bringing the total federal debt held by the public to $28.2 trillion, or 98% of GDP—up from 96% the prior year.
Following the release of the deficit figures, the White House pointed to past tax cuts as a factor in low revenue levels and growing debt. Treasury Secretary Janet Yellen, however, noted that the U.S. economy has remained resilient, while OMB Director Shalanda Young emphasized the Biden administration’s commitment to fiscal responsibility.
The growing national debt has become a pressing issue for voters ahead of the upcoming presidential election, as concerns about rising living costs and higher interest rates continue to impact households. The Federal Reserve, which began lowering rates last month, has signaled more rate cuts may be on the way, further intertwining the national debt with the broader economic outlook.