Q1 fiscal year sees US deficit exceed $500 billion

TL/DR –

The U.S. government’s budget deficit for Q1 of its fiscal 2024 year hit nearly $510 billion, according to a report by the Treasury Department. The increased deficit has pushed the total government debt past $34 trillion for the first time. Despite the Biden administration’s assurances that the Inflation Reduction Act would reduce the deficit, the current trends suggest that the deficit could exceed $2 trillion by the end of 2024.

The U.S. Government’s Growing Budget Deficit

In Q1 of the fiscal year, the U.S. government’s budget deficit increased by nearly half a trillion dollars, according to a recent Treasury Department report. From October through December 2023, the budget deficit rose to just under $510 billion, a 52% increase from the same period in the previous year. This surge has pushed total government debt past the $34 trillion mark for the first time.

Record High Deficit in 2024

Compared to 2023’s annual deficit of $1.7 trillion, 2024’s deficit is on track for a record high. In Q1 of fiscal 2023, the gap between spending and income was $421.4 billion, which increased by $89 billion in 2024. This rise was driven by increased Social Security payments and interest costs. If the current trend continues, the 2024 deficit could total over $2 trillion.

The Impact of the Inflation Reduction Act

Despite the Biden administration’s claim that the Inflation Reduction Act would cut “hundreds of billions” from the deficit, the deficit continues to rise. Although inflation has decreased, December saw a 0.3% increase in the consumer price index, pushing the annual rate to 3.4%, which is above the Federal Reserve’s 2% target.

Rising Financial Costs amid Inflation

As the Federal Reserve strives to combat inflation, elevated interest rates have led to increased financing costs for the government, totaling nearly $660 billion in 2023. This has raised the debt-to-GDP ratio to 120% in the third quarter of 2023, potentially impacting the U.S. economy’s overall health.

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