The federal government has notched its worst non-pandemic deficit in history, spilling more than $1.8 trillion worth of red ink across the budget and signaling worse times to come.
It was the highest budget deficit in U.S. history other than the acute emergency period of the COVID-19 pandemic.
The Treasury Department reported that the U.S. paid more than $1 trillion in gross interest on the federal debt, marking the first time the federal government has crossed that grim milestone.
The government did report a remarkable surge in tax revenue of nearly $480 billion, or nearly 11%, during the just-ended fiscal year 2024.
Still, the revenue couldn’t match the rapacious pace of spending by Congress, President Biden and an aging population, totaling $620 billion more compared with 2023.
In stark numbers, the government received a record $4.9 trillion in revenue in fiscal 2024. Spending was $6.8 trillion, below the COVID-19 pandemic record year of 2020.
Mr. Biden’s team celebrated what it could in the news. Officials said inflation is lower than it was early in his term, the economy remains relatively strong and the unemployment rate is low.
“Over the past 3½ years, the Biden-Harris administration has overseen a strong economic recovery, amassed one of the most successful legislative records in generations, grown the economy from the middle out and bottom up, lowered the deficit and delivered important progress to lower costs for the American people on behalf of the American people,” said Shalanda Young, the White House budget director.
Administration officials also touted the nearly $2 trillion deficit as a win compared with the depths of the COVID-19 pandemic, when the government ran a $3.1 trillion hole in 2020 and was $2.8 trillion in arrears in 2021.
As emergency spending dried up, the government overspent by $1.4 trillion in 2022. The situation has worsened in the two years since, with a $1.7 trillion gap last year and this year’s figure topping that.
The Congressional Budget Office, in its year-end analysis, said the revenue surge was driven primarily by individual income taxes, which grew by 11%, and corporate income taxes, which grew by 26%. Some of that was caused by IRS shifts in the timing of payments and enforcement.
Social Security payments increased $107 billion, or 8%, and Medicare payments grew $78 billion, or 9%, because of new enrollees and higher rates paid to service providers, CBO said.
The biggest driver of the spending increase was interest on the public debt.
The Treasury Department said that number rose $254 billion in one year, swamping the rise in Social Security and Medicare combined. The government reported paying $1.133 trillion in interest payments last year.
Although the sheer size set a record, the measurement against gross domestic product was lower than in the early 1990s, Treasury officials said.
Officials said a drop in the Federal Reserve’s target interest rate led to a decline in interest payments for September, the final month of the fiscal year.
Analysts see interest payments as a particularly troubling part of the budget, a black hole that pays for spending from years and decades ago.
Biden officials said the deficit is somewhat misleading because the Supreme Court’s decision invalidating the president’s student loan forgiveness plan artificially lowered the deficit. It added $334 billion in revenue because of how those loan payments are captured in budgeting.
Without that, this year’s deficit would have been lower than last year’s, the Treasury Department said.
Even after the Supreme Court shot down his student loan forgiveness plan, Mr. Biden has been cobbling together a series of smaller absolutions of student loans, which, along with defaults and other spending, have sent the education budget soaring.
Five years ago, in fiscal 2019, the government spent $135 billion on education. In the just-ended fiscal year, it spent $305 billion.
The budget numbers barely rippled through the presidential campaigns of Vice President Kamala Harris and former President Donald Trump, who are proposing new tax breaks and spending increases that would increase the deficit.
The one exception to the budget blackout is a complaint from former President Barack Obama, campaigning for Ms. Harris this weekend, that Mr. Trump’s 2017 tax cuts “drove up the deficit.”
“And now he wants to do it all over again,” Mr. Obama said.
The new Treasury numbers don’t necessarily bear out Mr. Obama’s criticism.
In early 2017, before Mr. Trump signed the tax cuts into law, CBO was projecting that government revenue in 2024 would be $4.5 trillion. A year after the law took effect, CBO cut that to $4.4 trillion.
Treasury said the government collected $4.9 trillion, or roughly $400 billion more than the projection.
The bigger deficit issue was on the spending side.
In 2018, CBO projected spending in this just-ended fiscal year to be $5.7 trillion. It was ultimately $1.1 trillion more.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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