The U.S. federal deficit is expected to hit $2 trillion in the 2024 fiscal year, nearly double the amount before the COVID-19 pandemic.
Federal borrowing is now over $5 billion per day, raising concerns among policymakers and experts about the country’s financial stability.
A report from the Congressional Budget Office (CBO) estimates that the federal deficit jumped to $1.8 trillion in fiscal year 2024, an increase of $139 billion from the previous year.
This significant rise comes despite a notable increase in federal revenue by 11%, or $479 billion, compared to the prior fiscal year.
The CBO noted that the rise in revenue was mainly due to higher individual income tax collections.
The rapidly expanding deficit is happening against the backdrop of a growing national debt, which is expected to approach $36 trillion soon.
This rise in debt has prompted renewed debates about fiscal responsibility in Washington, as borrowing costs and interest payments escalate.
“In 2025, lawmakers will face new hurdles,” warned Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “Not only rising deficits, debt, and interest, but also the reinstatement of the debt ceiling, the end of the Fiscal Responsibility Act’s budget caps, and major tax and spending expirations.”
Federal borrowing remains a key concern for economic experts, especially as the debt is set to reach an all-time record as a share of the economy by 2027.
Despite revenue increases in all major categories, borrowing has outpaced growth, indicating a growing gap between government spending and revenue generation.
Polls have consistently shown that inflation, driven in part by unchecked debt spending, remains a top concern for Americans.
The fiscal outlook becomes more daunting when factoring in projections that key trust funds like those for highways, Medicare, and Social Security will run out of reserves within the next dozen years. If this happens, policymakers will be forced to make difficult decisions on funding priorities.
Maya MacGuineas noted that, with the 2024 fiscal year ending and a new one starting, the lack of a clear plan to address the fiscal challenges only exacerbates the issue.
“We cannot afford to continue to borrow at this rate indefinitely. It is long past time that policymakers stop adding to our growing national debt and instead agree on a path forward that puts the debt on a downward, sustainable path for future generations,” she said.
This marks the second consecutive year where the deficit has approached the $2 trillion mark, even after accounting for temporary fiscal adjustments, such as the reversal of student loan cancellations.
The CBO’s latest report highlights the need for fiscal changes.
With fiscal year 2025 approaching, the situation is likely to get worse, putting more pressure on lawmakers to either cut spending or leave the problem for future generations.
If no action is taken, the U.S. could face a financial crisis that would impact the economy and its position globally.