U.S. budget deficit tops $1.8 trillion in fiscal 2024, interest payments outpacing national defense

The U.S. budget deficit grew to $1.833 trillion for fiscal 2024, the highest outside of the COVID-19 era, with interest on the federal debt exceeding $1 trillion for the first time, the Treasury Department said on Friday.

The deficit for the year ended September 30 was up 8 percent 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 in 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.

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

Interest costs

The biggest driver of the year's deficit was a 29 percent 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.

A senior Treasury official said the interest costs as a share of GDP reached 3.93 percent, below the 1991 record of 4.69 percent but the highest percentage since 4.01 percent in December 1998.

The weighted average interest rate on federal debt was 3.32 percent in September, up 35 basis points from a year earlier, but down from 3.35 percent in August, marking the first monthly decline since January 2022.

Other drivers of increased outlays for the fiscal year included Social Security, up 7 percent to $1.520 trillion, Medicare, up 4 percent to $1.050 trillion, and military programs, up 6 percent to $826 billion.

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.

Reported receipts were a record for September at $528 billion, up 13 percent from a year earlier, while outlays were $463 billion, down 27 percent largely due to the calendar adjustments.