US Government Runs 1st-Quarter Budget Deficit of $510 Billion

The National Debt Clock in Washington on Nov. 13, 2023. (Madalina Vasiliu /The Epoch Times)

The U.S. government recorded a budget deficit of $129 billion in December 2023, up by 52 percent from the same time a year ago, according to new data from the Treasury Department.

In the first three months of the current fiscal year, Washington’s budget gap has soared to $510 billion, up by 21 percent year-over-year.

Tax receipts slumped by nearly 6 percent year-over-year in December 2023, while outlays climbed by about 4 percent.

Last month, the largest budgetary items were Social Security ($117 billion), national defense ($81 billion), health ($78 billion), and Medicare ($65 billion).

Net interest payments were the fourth-largest outlay for the federal government, coming in at $68 billion. In the first quarter of fiscal year 2024, net interest payments totaled $216 billion.

Gross interest on Treasury debt securities—semi-annual interest payments to trust funds investing in special issue par value government securities—climbed by $119 billion in December 2023. Year-to-date, gross interest has soared by more than $288 billion.

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As a result, the U.S. government has spent $504 billion in interest payments in the first quarter of the fiscal year.

By this rate, the federal government is on track to post an annual budget deficit of roughly $2 trillion.

According to the Treasury’s Debt to the Penny statistics, the national debt has skyrocketed by about 9 percent year-over-year to $34 trillion.

What the CBO Estimates

Before the Treasury’s official release, the Congressional Budget Office (CBO) projected in its Monthly Budget Review that the U.S. government recorded a $128 billion shortfall in December 2023, up by 56 percent year-over-year.

“If not for shifts in the timing of certain payments, the increase in outlays would have been slightly smaller,” the CBO said in the report.

In the first quarter of fiscal year 2024, the nonpartisan watchdog estimated that the federal deficit was $509 billion. Compared to the same period in the last fiscal year, the quarterly shortfall was up by 17 percent.

During the October-to-December 2023 period, federal revenues jumped by 8 percent to $1.1 trillion, driven by a 42 percent boost in corporate income taxes and a 5 percent increase in individual income and payroll taxes.

Spending advanced by 12 percent to $1.6 trillion in the first three months of FY 2024. This was fueled by a 49 percent year-over-year spike in net outlays for interest on the public debt and the Federal Deposit Insurance Corporation’s (FDIC) “facilitating the resolution of bank failures” that happened last year. There was more also spending for the Department of Defense (11 percent), the Department of Veterans Affairs (16 percent), and the Department of Energy.

‘Riches to Rags’

The Committee for a Responsible Federal Budget (CRFB) published a comprehensive Jan. 10 report looking at the contributing factors of “fiscal deterioration since 2001.”

As the national debt keeps climbing, observers have warned that tax cuts or spending increases caused the fiscal mess.

White House press secretary Karine Jean-Pierre recently told reporters that Republican tax cuts caused 90 percent of the national debt increase in the past 20 years.

“If you look at that data, there’s a trickle-down debt. If you think about it, Republican tax cuts are responsible for about 90% of the increase in the debt as a share of the economy over the last two decades, excluding emergency spending,” Ms. Jean-Pierre said at a Jan. 3 press briefing.

White House press secretary Karine Jean-Pierre speaks during the daily press briefing at the White House in Washington on May 24, 2023. (Madalina Vasiliu/The Epoch Times)

However, the CRFB noted that “both spending increases and revenue reductions can explain the growth in deficits and debt” over the past two decades.

“The growth in deficits and debt can be explained both by the automatic growth in mandatory spending and by the enactment of tax cuts and spending increases,” the CRFB wrote. “Absent any of these phenomena, debt would be on a far more sustainable path.”

By assessing public policy efforts of the past 20 years, debt as a share of the gross domestic product (GDP) is 37 percent higher because of tax cuts. At the same time, it’s 33 percent higher because of substantial spending hikes and another 28 percent higher “due to recession responses.”

“Most debt—77 percent of GDP—can be attributed to bipartisan legislation,” the report reads. “Absent these tax cuts and spending increases, the debt would be fully paid off.”

Borrowing Binge

Treasury officials planned to borrow about $816 billion to manage growing deficits and higher interest costs.

In recent months, the challenge for the U.S. government has been finding enough buyers to scoop up the rampant bond issuance.

Treasury auctions have become highly anticipated events for Wall Street as the results could signal the market’s concerns over the fiscal health of the U.S. government.

During the Jan. 11 $21 billion 30-year Treasury auction, primary dealers—financial institutions that purchase securities that domestic and foreign investors don’t—acquired nearly 15 percent of supply.

The average rate over the past year was 12 percent.

Market analysts say the event was mixed, with CNBC’s Rick Santelli offering a C+ grade for the 30-year auction.

The total U.S. bond market has been in a drawdown for 41 months, “by far the longest bond bear market in history,” Charlie Bilello, chief market strategist at Creative Planning, noted on X, formerly known as Twitter.