Biden Administration Runs a Deficit of Half a Trillion Dollar

After only one quarter into fiscal 2024, the federal government has accumulated a budget deficit exceeding half a trillion dollars.

In December, the budget shortfall reached $129.37 billion, as reported by the latest Monthly Treasury Statement, pushing the 2024 deficit to $509.94 billion—an increase of 21 percent compared to the first quarter deficit in fiscal 2023.This follows the third-largest annual budget deficit in history, totaling $1.7 trillion.

These substantial monthly budget shortfalls are rapidly escalating the national debt. On December 29, the national debt surpassed $34 trillion, a stark contrast to the $31.46 trillion when Congress effectively removed the debt ceiling on June 5.

Excessive Government Expenditure
President Joe Biden attributes the expanding budget deficit to Republican tax cuts during the Trump administration, but the data contradicts this claim. In the initial quarter, federal receipts reached just under $1.1 trillion, marking a 12 percent increase compared to the first three months of fiscal 2023.

Although federal revenue experienced a decline in fiscal 2023 following a windfall in 2022, the Tax Foundation’s analysis of Congressional Budget Office data indicates a 21 percent increase in federal tax collections in fiscal ’22.

Despite tax collections reaching a multi-decade high of 19.6 percent as a share of GDP, CBO analysts had previously warned that these prosperous times wouldn’t endure.

As anticipated, government receipts decreased by 9.3 percent in fiscal 2023. Nevertheless, receipts have risen this year even as the deficit has grown.

The genuine challenge lies in the realm of expenditures. In the past two years, the Biden administration has consistently surpassed half a trillion dollars in monthly spending.

In the first quarter of fiscal 2024 alone, federal government expenditures totaled $1.62 trillion, reflecting a 12 percent surge compared to the same period last year.
The Impact of Overspending and Elevated Interest Rates
A significant portion of the current debt was financed at very low rates before the Federal Reserve initiated its hiking cycle. Each month, some of this low-yield debt matures, requiring replacement with bonds that carry significantly higher rates.

The weighted average interest rate on the government’s outstanding Treasury securities climbed to 3.17 percent by the end of December, compared to a weighted average rate of 2.32 percent in December 2022.

The increase in interest rates has elevated interest payments to over 35 percent as a proportion of total tax receipts in fiscal 2023.

Essentially, the government is already allocating more than a third of the taxes it collects toward interest expenses.

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