Additional tax revenue was not enough to cover the sharp rise in debt service during periods of high rates.
The US budget deficit soared in 2024 as additional tax revenue was not enough to cover the sharp rise in debt service during a period of high rates, an announcement that comes less than three weeks before the ‘election.
At the end of the 2024 fiscal year, ending September 30, the deficit rose to 6.4% of gross domestic product (GDP), compared to 6.2% in 2023, the Treasury Department announced on Friday. .
It thus amounts to 1,833 billion dollars, up 8% compared to the previous year. This is the third highest amount in United States history, after the records of 2020 and 2021 linked to the Covid crisis.
The accounts of the world’s largest economy were then weighed down by the explosion in public spending.
In 2022, however, the deficit had been largely reduced. But it started to rise again in 2023 and then in 2024, under the effect of the high interest to be paid in the face of the staggering American debt.
“The Biden-Harris administration remains focused on the long-term growth of our economy, with historic investments in infrastructure, manufacturing and clean energy, while considering our long-term financial outlook,” commented the Secretary of the Treasury, Janet Yellen, quoted in the press release.
The country’s budgetary situation is an important concern for American voters, who will have to choose on November 5 between the Democratic candidate and vice-president of Joe Biden, Kamala Harris, and the former Republican president, Donald Trump.
Interest rates
In detail, from October 2023 to September 2024, revenues increased by 11%, to $4.919 billion.
Taxes paid by American households were indeed higher than in the previous year, as their financial situation improved due to rising employment and wages, a Treasury official said. to journalists.
Expenditures increased by 10%, to 6.752 billion. This is notably due to the increase of almost a third in debt service, while interest rates were at their highest level since the early 2000s.
The US central bank (Fed), however, began lowering rates in September, and is expected to continue this trend over the coming months, encouraged by slowing inflation.
In June, the Congressional Budget Office (CBO) projected a deficit of $1.9 trillion for 2024.
This independent body responsible for providing the US Congress with budgetary and economic analyzes also predicted that it would then rise more than expected over the next ten years, driven by the costs of interest on the debt and aid. Ukraine.
But he also estimated that immigration should increase GDP by 8.9 trillion dollars over the period.
The American public deficit is, as a percentage of GDP, close to that of France, which amounted to 6.1% in 2024, well above the European ceiling of 3%.
This earned France an EU procedure for excessive deficit, with six other countries having exceeded the 3% bar set by the Stability Pact last year. They must take corrective measures, under penalty of financial sanctions.
The French government has set itself the objective of reducing it to 5% in 2025, which represents an effort of several tens of billions of euros.
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