U.S. deficit for January down 43%
Cumulative federal debt still increasing, economists say
The federal deficit dropped by 43% to $22 billion for January, down from the $39 billion deficit reported a year earlier, the U.S. Treasury reported Monday.
“The deficit in the month of January was smaller than it was in January of 2023, but if you look at the cumulative deficit for the past 12 months, it’s actually bigger than it was last year, it’s about $200 billion bigger,” University of Central Arkansas associate professor of economics Jeremy Horpedahl said.
“So while this one month was a little smaller, the total debt just keeps going up and has been kind of settling in at $2 trillion roughly for every 12 months now.”
Total monthly receipts in the United States amounted to $477.3 billion, with $283 billion coming from individual income taxes and $157 billion from social insurance and retirement.
The government reported a cumulative deficit of $531 billion so far in fiscal year 2024, which is $80 billion higher than the same period in the previous fiscal year when adjusted for timing shifts, according to the Bipartisan Policy Center.
Reuters reported contributing factors for the higher deficit were rising costs to service the national debt and outlays for military programs, Social Security and Medicare.
“Interest rates have come down a bit on new debt … but they’re having to roll over so much debt that was built up during the pandemic and that’s being rolled over at much higher rates, even though the rate on the new debt they are paying now is a bit lower than it was a year ago, it’s still very high, and the cumulative numbers are so big,” Horpedahl said.
“Just last week, [Congressional Budget Office]’s latest longterm budget forecasts, they’re predicting that these deficits are going to keep going up, so I think we’re really starting to see that happening and probably will not go away for a very long time.”
Reuters reported record receipts for the month of January and record year-to-date receipts and outlays as well, both of which are in the trillions.
This is indicative of continued economic growth, Horpedahl said.
“In the third and fourth quarter, growth was way above [what was] forecast, so I think we’re still seeing that this quarter, the economy is the biggest it’s ever been, so tax receipts are going to be as big as they’ve ever been.”
Events happening at the Internal Revenue Service have also contributed to higher receipts in January.
The IRS cleared a backlog of pandemic-delayed tax returns, individual tax refunds were $15 billion lower in January than a year earlier, and the agency launched new scanning technology to process paper returns more quickly last year; individual withheld receipts in January also benefited from strong employment trends and those receipts were up $20 billion, or 7%, from a year earlier, Reuters reported.
“With the Inflation Reduction Act a few years ago, they gave the IRS a lot of new funds to try to catch up with the backlog and modernize some systems and we’re starting to see that kick in” with the start of the tax filing season, Horpedahl said.
“We’ll probably see more of that in the future as well, with a lot of high income earners, the audits have been down for the past few years and I think now we’re starting to see them catch up with those, that’s probably all contributing to this too.”
The public debt grew by 35% in January compared with a year earlier; debt interest costs were up by 37% and outpacing outlays for Medicare, Reuters reported.
“It’s expected, but this is pretty significant,” Horpedahl said.
“Somehow, it’s both outpacing Medicare and now national defense, so it’s becoming one of the biggest budget items, and with the debt being this big, that will stay there, so paying interest on debt will continue to be one of the biggest things the government spends money on.”
The national debt as of February 9 was $34 billion.