U.S. deficit for 5 months 15% higher than in 2023

The U.S. Treasury posted a $296 billion budget deficit for the month of February, a 13% increase from February 2023, while the year-to-date deficit for the first five months of fiscal year 2024 rose by 15% to $828 billion compared with the same period in 2023.

The U.S. Treasury estimates the deficit will hit $1.9 trillion this fiscal year, an estimate that remains unchanged from the Treasury’s budget report from the previous month, said Michael Pakko, chief economist and state economic forecaster for the Arkansas Economic Development Institute.

Government outlays, totaling $2.7 trillion for the first five months of the fiscal year, rose by 9% compared to the same period a year ago.

Government revenues, totaling $1.9 trillion for the first five months of the fiscal year, rose by 7% compared to the same period a year ago.

“That just means a widening gap in the deficit,” Pakko said.

“That means that there’s a 14.5% increase in the deficit for this year compared to fiscal year 2023.”

Revenues in February were $271 billion, a 3% increase compared to February 2023; outlays in February were $567 billion, an 8% increase compared to February 2023.

Government spending has surged during this period amid rising interest on the national debt.

Increased spending for the first five months of fiscal 2024 compared to the same period in 2023 was partly attributed to government spending on the public debt increasing by $120 billion, according to the Congressional Budget Office Monthly Budget Review for February.

The agency indicated Federal Deposit Insurance Corporation (FDIC) outlays rose by $61 billion during this period because of spending to resolve bank failures last year.

There was also increased spending on Social Security benefits, Medicaid and Medicare, as well as the Department of Defense during this period, according to the agency’s report.

“I think one of the big factors is simply the fact that we have ongoing inflation, so prices for everything are higher now than they were a year ago,” Pakko said.

“But when it comes to some of the budget figures, it looks like revenues have been boosted a little bit by corporate income tax receipts, at least through the first five months of the fiscal year. Another factor is the interest payments on the federal debt are quite a bit higher now compared to, say, a year ago.”

Increased revenues for the first five months of fiscal year 2024 compared to the same period in 2023 were due to individual income and payroll taxes together rising, individual income tax refunds declining and receipts from corporate income taxes increasing by 34%, the agency reported.

Individual tax withholding receipts in February, benefiting from strong employment trends, were up by 8% or $21 billion from a year ago, Reuters reported on Tuesday.

“The income taxes withheld were up compared to the previous year, looking at fiscal year-to-date, only up about 1.3%, but the underlying data shows that incomes are rising, so withholdings are up as well,” Pakko said.

The Internal Revenue Service has made improvements since the pandemic, which could speed up the processing of taxes this spring. The agency adopted new scanning technology last year to process paper returns more quickly.

Thanks to such improvements, the federal government should see the expected surplus in April as tax returns are filed, Pakko said.

The national debt as of March 8 was $34.4 trillion.