The US federal budget deficit reached half a trillion dollars in the first three months of the new fiscal year as spending picked up while receipts shrank, the US Treasury revealed on Thursday.
In December alone, the US budget gap totaled $129 billion, up $44 billion, or 52%, from a year earlier, the data showed.
For the first three months of the fiscal year 2024, which started on October 1 2023, the US federal deficit surged by $89 billion, or by 21%, to reach $510 billion, up from the $421 billion shortfall over the same period the previous year.
The jump in the deficit pushed total US government debt past the $34 trillion mark for the first time ever.
According to the Treasury, outlays for December rose by 3% to $559 billion, a record for the month, partly due to higher Social Security expenses and interest payments on the public debt. Meanwhile, receipts for the month dropped by 6% to $429 billion.
Between October and December, interest costs on the federal debt soared by $78 billion, to $288 billion, compared to the same period of last year as a series of rapid rate hikes by the Federal Reserve pushed interest expenses higher.
With interest rates elevated as the Federal Reserve fights inflation, financing costs for the government in 2023 totaled nearly $660 billion, the data showed.
The US budget gap has continued to widen despite assurances from the administration of US President Joe Biden that the Inflation Reduction Act, in addition to cutting prices, would shave “hundreds of billions” off the deficit.
Economists are sounding the alarm over the upward trend in the US budget deficit, saying that if the current pace continues, this year will end with a shortfall of more than $2 trillion. They warn that the higher spending will eventually curb the economy’s long-term growth potential.
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