The U.S. budget deficit surged to $1.8 trillion in the latest fiscal year, fueled by soaring interest payments and increased spending on entitlement programs, marking a widening gap between federal spending and tax revenues. This alarming deficit growth underscores the financial challenges awaiting the next president, as both Donald Trump and Kamala Harris propose plans that could further balloon the national debt in the coming decade.
With the 2024 election on the horizon, Trump, the Republican nominee, and Harris, the Democratic pick, have unveiled tax and spending proposals that would add trillions more to the deficit. Whoever takes office will immediately face critical decisions on federal spending levels, the national debt limit, and the fate of expiring tax cuts. These decisions will pit the growing fiscal crisis against public demand for continued federal benefits and lower taxes.
According to the Congressional Budget Office (CBO), the government took in $4.92 trillion in revenue but spent $6.75 trillion in the fiscal year ending September 30. This created a deficit of $1.83 trillion, significantly higher than the $1.7 trillion reported in 2023. The 2023 deficit was artificially reduced by a temporary accounting adjustment related to President Biden’s student-debt cancellation program, which the Supreme Court later blocked.
Federal entitlement programs like Social Security and Medicare continue to weigh heavily on the budget, with costs rising 6% over last year. Interest payments on the national debt skyrocketed by 34%, totaling $950 billion—more than military spending—as higher interest rates amplified the government’s borrowing costs.
Despite the revenue boost of 11%, driven by delayed tax collections from natural disasters in California and the pausing of pandemic-era tax credits, the deficit remains a glaring issue. White House spokesman Jeremy Edwards acknowledged the severity of the situation, reiterating President Biden’s commitment to deficit reduction by ensuring the wealthy and large corporations contribute more in taxes while cutting wasteful spending on special interests.
Although the U.S. has faced larger deficits in its history, they occurred during times of war or economic downturn, not in periods of low unemployment and stable economic growth, as seen today. Economists warn that the country’s fiscal situation is becoming increasingly precarious, with projections of record-level debt accumulation over the coming years.
Both Trump and Harris are proposing measures that would exacerbate the deficit. Trump’s plans include $6.5 trillion in tax cuts, while Harris proposes $4.2 trillion in cuts, with both candidates promising to shield Social Security and Medicare from reductions. Trump’s proposed tax cuts would eliminate levies on tips, overtime pay, and Social Security benefits, while adding to spending through his missile-defense program and mass-deportation plans. According to the Committee for a Responsible Federal Budget (CRFB), Trump’s fiscal proposals could increase the deficit by $7.5 trillion over the next decade.
Harris, meanwhile, aims to expand Medicare to cover long-term care and has endorsed new taxes on corporations and top earners to pay for her proposed programs. However, the CRFB estimates her initiatives would still increase the deficit by $3.5 trillion.
Despite bipartisan rhetoric about reducing deficits, there is little agreement on how to achieve it. Policymakers have repeatedly agreed to limit discretionary spending by federal agencies, but the biggest drivers of the deficit—Social Security and Medicare—remain untouched. Romina Boccia, director of budget and entitlement policy at the Cato Institute, emphasized that any meaningful deficit reduction plan must address these programs. “Any fiscal plan that doesn’t tackle these programs is ignoring the core cause of higher spending,” she stated.
The looming expiration of Trump’s 2017 tax cuts presents a pivotal moment for fiscal policy reform. Progressives are pushing for new revenue streams to offset any extensions to those tax cuts, arguing that this is an opportunity to reverse the current trend of increasing deficits. Harris supports extending tax cuts for households earning under $400,000 while pushing for expanded child tax credits and initiatives to improve healthcare and affordable housing.
Enacting these proposals, however, will be an uphill battle. If Harris wins but lacks Democratic control of Congress, passing such reforms could be challenging. Her proposals, including higher taxes on corporations and the wealthiest Americans, face stiff opposition from Republicans, who argue that raising taxes would stifle economic growth.
As the U.S. stares down growing deficits and mounting debt, the outcome of the 2024 election could set the tone for the nation’s fiscal future. Both candidates’ plans, while offering short-term relief to taxpayers, risk adding fuel to the fire of long-term debt—a challenge that will need addressing sooner rather than later.
