US reports third largest budget deficit
The US can print its currency to cover its external account, but this practice can only continue as long as countries like China, Japan, and Saudi Arabia are willing to buy US debt and hold dollars as a reserve currency. photo: file
The US budget deficit grew to $1.833 trillion for fiscal year 2024, the highest outside of the Covid era, as interest on the federal debt exceeded $1 trillion for the first time and spending grew for the Social Security retirement programme, healthcare and the military, the Treasury Department said on Friday.
The deficit for the year ended September 30 was up 8%, or $138 billion, from $1.695 trillion recorded in fiscal year 2023. It was the third-largest federal deficit in US history, after the pandemic relief-driven deficits of $3.132 trillion in fiscal 2020 and $2.772 trillion in fiscal 2021.
The 2023 deficit had been reduced by the reversal of $330 billion of costs associated with President Joe Biden's student loan programme after it was struck down by the US Supreme Court. It would have topped $2 trillion without this anomaly.
The sizable 2024 budget gap of 6.4% of gross domestic product (GDP), up from 6.2% a year earlier, could pose problems for Vice President Kamala Harris' arguments ahead of the November 5 presidential election that she would be a better fiscal steward than Republican opponent Donald Trump.
A fiscal think tank, the Committee for a Responsible Federal Budget, has estimated that Trump's plans would pile up $7.5 trillion in new debt, more than twice the $3.5 trillion envisaged from Harris' proposals.
White House Budget Director Shalanda Young emphasised the strong growth in the US economy and the Biden administration's investments in clean energy, infrastructure and advanced manufacturing.