The U.S. fiscal deficit for the last year, which ended in late September, surged to its third-highest level in history. During this period, interest payments exceeded a staggering $1 trillion for the first time, raising significant financial concerns ahead of the presidential election and potentially limiting the policy options available to the incoming president.
According to the Treasury Department, while revenues for fiscal year 2024 reached a record high of $4.9 trillion, they fell short of covering expenditures totaling $6.75 trillion. This discrepancy resulted in a deficit increase of over 8%, amounting to $138 billion and bringing the total deficit to $1.833 trillion, marking it as the third highest ever. Contributing factors include rising costs in Social Security and Medicare, as well as extraordinary spending measures implemented to combat the COVID-19 pandemic. Additionally, government debt ballooned by $2.3 trillion to $35.7 trillion. This rise in debt is linked to consecutive interest rate hikes by the Federal Reserve aimed at curbing inflation, which have further exacerbated the deficit and debt burdens. A Treasury official noted that the average interest rate on government debt for the past year was 3.32%, up from 2.97% the previous year.
Total interest payments made by the U.S. government last year reached $1.16 trillion, breaking the $1 trillion barrier for the first time. Excluding interest on government investments, net interest payments also hit a record high of $882 billion. With neither Democratic presidential candidate Kamala Harris nor Republican rival Donald Trump prioritizing deficit reduction in their campaigns, managing the national debt is set to become a significant challenge for the next president.
