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The U.S. Treasury building in Washington, D.C., on Aug. 15, 2023.

The Biden administration reported a budget deficit exceeding $1.8 trillion in fiscal year 2024, marking an increase of over 8% from the previous year and ranking as the third highest on record. In spite of a modest surplus in September, the total shortfall reached $1.833 trillion, a $138 billion jump from the previous year. The only years with larger deficits were 2020 and 2021, when extensive spending was undertaken in response to the Covid-19 pandemic.

The deficit persisted despite record receipts of $4.9 trillion, falling short of outlays totaling $6.75 trillion. Government debt has surged to $35.7 trillion, ballooning by $2.3 trillion from the end of fiscal year 2023.

High Interest rates resulting from the Federal Reserve’s measures to combat Inflation have exacerbated the debt and deficit situation. Interest expenses for the year amounted to $1.16 trillion, surpassing the trillion-dollar threshold for the first time. Net of interest earned on government investments, the total reached a record $882 billion, ranking as the third-largest outlay in the budget, outpacing all other items except Social Security and healthcare.

The average interest rate on all government debt stood at 3.32% for 2024, up from 2.97% the previous year. Despite running a surplus of $64.3 billion in September, aided in part by calendar effects shifting benefit payments into August, which recorded a $380 billion deficit, the largest of the year.

As a percentage of the total U.S. economy, the deficit exceeds 6%, deviating from historical norms during an expansion and surpassing the 3.7% average over the past 50 years, as noted by the Congressional Budget Office. The CBO projects that deficits will continue to climb, reaching $2.8 trillion by 2034, with a corresponding increase in debt from around 100% of GDP to 122% in the same year.

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