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October marks the end of one federal government fiscal year and the start of the new.
It offers an opportunity for budget wonks — like ourselves — to take stock of where America’s finances are headed, and the picture is scary.
Frighteningly, the federal deficit we racked up in the last fiscal year (2024) was $1.8 trillion. That’s already almost double what we were borrowing annually before the COVID pandemic. That means despite the economy recovering since then, we’re still piling on debt. Our deficit is now the largest it has ever been as a share of the economy outside of a war, recession or emergency.
The resulting debt is, in fact, so massive that we spent nearly $900 billion on interest on the national debt alone in fiscal year 2024.
To put it in perspective, that’s more than we’re spending on all children programs at the federal level. It’s even more than we’re spending on national defense or Medicare. Only Social Security tops our interest payments as a larger line item in the budget. This deficit and debt burden is clearly crowding out other important priorities and reducing our ability to invest in future generations.
It is often said that budgeting is about choices and priorities. It’s about how to allocate between consumption and investment and, ultimately, how much of the bill we are willing to pay now or leave our grandkids to pay.
