The Runaway US Budget Deficit in 2024: A Reality Check.
The year 2024 was supposed to mark a turning point for the United States, with its runaway budget deficit gradually normalizing after two crisis-filled years. However, recent events suggest that this may not be the case. In August, the US experienced an astonishing $380 billion budget deficit, up more than 50% from the previous month and over 66% compared to August last year. This shocking increase in government spending has raised concerns about the long-term sustainability of the US economy, particularly as interest rates continue to rise.
This sudden surge in spending is largely due to efforts by the Biden administration to reboot the economy and prevent a recession ahead of the 2024 elections. As a result, government outlays reached an unprecedented $686 billion in August, which was the highest since March 2023 and only surpassed by a handful of crisis months during the Covid pandemic.
While it may seem surprising that spending has increased so dramatically, it is worth noting that revenues have also shown signs of recovery. Capital gains taxes from the booming stock market have helped boost government income, which is an encouraging sign for those concerned about the state of US finances.
However, there are still significant challenges to overcome, particularly when it comes to interest on the country’s ever-growing debt. As interest rates continue to rise, the cost of servicing this debt has become increasingly unsustainable, with gross interest payments reaching a record high of $92.3 billion in August alone. This brings the total amount spent on interest for fiscal year 2024 (ending September 30) to an unprecedented $1.049 trillion – the first time in history that the US has spent over $1 trillion on interest payments.
Moreover, if interest rates remain at their current high levels, it is predicted that the US will hit a staggering $1.6 trillion in annual interest expense by the end of 2024, making it the single largest outlay of the federal government. This grim prospect raises questions about the viability of the US economy and the political consequences for any leader seeking to steer the country through these uncertain times.
