2024's final budget deficit ends at $1.8 trillion. Does it matter?

On Tuesday, the Congressional Budget Office released their monthly US budget information statement for September. Which means that this report also gave the full-year total for the budget, and we got to see what the total deficit was.

The federal budget deficit was $1.8 trillion in fiscal year 2024, the Congressional Budget Office estimates. The estimated deficit for 2024 was $139 billion more than the shortfall recorded during fiscal year 2023. Revenues increased by an estimated $479 billion (or 11 percent). Revenues in all major categories, but notably individual income taxes, were greater than they were in fiscal year 2023. Outlays rose by an estimated $617 billion (or 10 percent).

To be exact, the CBO says the budget deficit for Fiscal Year 2024 ended up being $1.834 trillion. On the positive side, this was $81 billion less than what was projected by the CBO in June, and the CBO points out that if it wasn't for SCOTUS cancelling some canceled student loan debt, the deficit would have gone down in FY 2024.

[2023]’s deficit of $1.7 trillion would have been larger if not for the recording of budgetary effects related to the Supreme Court’s decision to overturn a plan the Administration announced in 2022 to cancel many borrowers’ outstanding student loans. If those effects, and the effects of timing shifts, were excluded for fiscal year 2023, the deficit for that year would have been $2.0 trillion instead of $1.7 trillion. Thus, without the savings related to the unwinding of the proposed debt cancellation (and excluding the effects of timing shifts), CBO estimates that the federal deficit would have been lower by $110 billion in 2024 than it was in 2023.

The current deficit is also well below the $3.0 trillion+ what we had during the pandemic-wracked 2020 Fiscal Year, which included massive increases in aids in pretty much every direction, and a lack of revenues as unemployment spiked in March and April of that year. But the deficit is also quite a bit more than what was projected in late 2020 (mostly due to the Biden Administration's stimulus measures), and is even above what was expected in Spring 2023.

Some of that increase in the deficit for 2024 was due to a $240 billion jump in interest costs on the US debt, which reflects the large increase in interest rates from the Federal Reserve in 2022 and 2023.

But I'll also note there was a significant drop in tax revenues in Fiscal Year 2023. This seems to be related to 2022's losses in the stock market (which have now long-recovered), and because of after-effects of 2022's inflation, as Social Security benefits had a large increase in 2023, and there was also a back-door tax break in 2023 as the tax brackets re-set at significantly higher income levels as an indexing to that inflation.

On the spending side, the cancellation of the student loan cancellation was a little less than half of the increase in spending.

Outlays in fiscal year 2024 were $6.8 trillion, CBO estimates—$617 billion (or 10 percent) more than in fiscal year 2023. Total outlays through fiscal year 2024, were about $50 billion (or less than 1 percent) less than CBO projected in June. If not for the timing shifts discussed above, outlays in fiscal year 2024 would have been $699 billion (or 11 percent) greater than in 2023. The discussion below reflects adjustments to exclude the effects of those timing shifts.

If the 2024 savings related to the unwinding of the proposed cancellation of student loans...and the effects of timing shifts are excluded, CBO estimates that outlays in 2024 would have been $369 billion (or 6 percent), greater than during the same period last fiscal year.

The $240 billion increase in interest costs on the US debt accounted for much of the rest of the added spending, along with a $107 billion increase in Social Security benefits and $78 billion in additional Medicare costs.

I still don't see the deficit as a major economic problem. The US dollar index is quite a bit stronger than it was in 2020, and has been relatively steady since the start of 2023, trading in a small range. And inflation has settled back toward 2019 rates even as the deficit is twice the level that it was back then (which also illustrates that much of the "inflation" was related to the big jump in profits over those 5 years).

But if you don't like the high negative numbers of our budget balance, I would suggest that a return to higher tax rates on the rich and corporate could help to bring that number down starting next year. And maybe bring down some of that greedflation in the process!