FY 2024 Ends with $1.8 Trillion Deficit

The U.S. Department of the Treasury recently released its final Monthly Treasury Statement for Fiscal Year (FY) 2024, showing a $1.8 trillion deficit for the year. The actual FY 2024 deficit is $82 billion lower than the Congressional Budget Office (CBO) projected in the June 2024 Budget and Economic Outlook.

The official recorded deficit for FY 2024 is $138 billion higher than the $1.7 trillion deficit in 2023. However, the 2023 deficit was artificially low because it deducted the cost of proposed student debt cancellation, which was ruled unconstitutional. After removing the effects of student debt cancellation, the deficit in 2023 was $2.0 trillion, or $195 billion higher than the 2024 deficit. As a share of the economy, the official deficit was 6.2 percent in 2023 and 6.4 percent in 2024.

Deficits are now almost double the pre-pandemic deficit of $984 billion from FY 2019 and higher in nominal dollars than at any other time in history, with the exception of the pandemic-driven deficits of FY 2020 and 2021.

In FY 2024, revenue collections totaled $4.9 trillion, a $479 billion increase from the year before, and outlays increased $617 billion to total $6.8 trillion.

Using the Bureau of Economic Analysis’s (BEA) updates to historical Gross Domestic Product (GDP) and the first estimate of 2024 third quarter GDP, we estimate that spending was 23.4 percent of GDP in FY 2024, up from 22.4 percent in 2023.

Net interest spending totaled $882 billion in FY 2024, 34 percent higher than in 2023 ($659 billion) and more than double the amount in FY 2019 ($375 billion). In FY 2024, interest costs exceeded spending on both Medicare and defense by around $8 billion. As a share of the economy, we estimate that interest grew from 2.4 percent in 2023 to 3.1 percent this year.

Using revised GDP, we estimate that revenue collections increased from 16.2 percent of GDP in FY 2023 to 17.1 percent of GDP in 2024.

As deficits remain high, debt continues to rise. Federal debt held by the public rose from 96 percent of GDP in FY 2023 to 98 percent in 2024, according to the BEA’s latest GDP estimates and revisions. Debt as a percentage of GDP has grown 19 percentage points from 79 percent in 2019 and will continue to grow rapidly, reaching roughly 120 percent of GDP by the end of the decade.

Deficits are projected to remain high in FY 2025 and throughout the next decade, rising to $2.9 trillion by 2034. The gap between revenue and spending is large and growing, and substantial policy change will be needed to put the nation’s finances on a sustainable path.