Halfway Through Fiscal Year 2024, the US Budget Deficit Surpasses $1 Trillion
The United States is facing a significant financial challenge as the budget deficit for fiscal year 2024 surpasses $1 trillion. According to the Treasury Department, the federal shortfall totaled $236 billion in March, down 38 percent from the previous year. However, the fiscal year-to-date budget gap is still a staggering $1.065 trillion, a decrease of $36 billion from the same period last year.
One of the major contributors to the deficit is Social Security, which has risen by approximately 8 percent year over year, reaching $741.5 billion halfway through fiscal year 2024. This is followed by health expenditures at $449 billion and national defense at $433 billion. Additionally, interest payments have been a significant expenditure, ballooning by 36 percent year over year to $522 billion.
The deficit, representing 6 percent of the gross domestic product (GDP), is a cause for concern among experts. Maya MacGuineas, the president of the Committee for a Responsible Federal Budget (CRFB), believes that borrowing over a trillion dollars in just six months is not sustainable and indicates that something is deeply wrong.
To manage the deficit-financed spending amidst higher borrowing costs, the Treasury plans to issue about $1 trillion in debt securities from January to June. However, lackluster demand poses a challenge for the U.S. government. The recent 10-year note auction showed that both domestic and foreign investors hesitated to buy government bonds due to hotter-than-expected inflation data, resulting in a 10-year Treasury yield of 4.56 percent.
The growing national debt has raised alarm bells among prominent individuals. Larry Fink, CEO of BlackRock, compared the current situation to Japan’s lost decade of the 1990s and warned that America’s snowballing debt could lead to periods of austerity and stagnation. However, he believes that a debt crisis is not inevitable and suggests a combination of tax hikes, spending cuts, and pro-growth policies.
JPMorgan Chase CEO Jamie Dimon also emphasizes the need to maximize economic growth to address the excess deficit and debt issues. He states that America’s anemic growth rate of 2 percent over the past two decades should have been aimed at achieving 3 percent growth, which could have significantly improved the country’s services and standards of living.
Concerns about the growing debt and deficits are shared by voters as well. A recent survey found that most voters are concerned about these fiscal challenges, with 26 percent expressing extreme concern. The poll also revealed that voters are almost evenly split on whether they trust President Joe Biden or former President Donald Trump more to reduce the deficit.
Under President Biden, the national debt has risen by approximately $7 trillion, while it climbed roughly $8.7 trillion during former President Trump’s term.
In conclusion, the United States is facing a significant budget deficit halfway through fiscal year 2024. The growing deficit, fueled by increased spending on Social Security and interest payments, raises concerns about sustainability. The Treasury’s plan to issue more debt securities faces challenges due to lackluster demand. Prominent individuals and voters alike express worries about the growing debt and deficits, emphasizing the need for proactive measures such as tax hikes, spending cuts, and policies that promote economic growth.
