The US ran the largest primary budget deficit among advanced economies in 2023, and the Congressional Budget Office expects the gap to stay between 3.1% and 3.6% of GDP for years to come. Mandatory entitlement spending and rising interest costs, not a temporary shock, are driving the shortfall.
The US posted a primary budget deficit of 7.6% of GDP in 2023, compared with a 4.6% average across other OECD member countries. That gap is the widest among the world's major advanced economies.
The deficit is structural, not cyclical
The primary deficit, which excludes interest payments and measures overspending on actual government operations, came in at 3.3% of GDP for fiscal year 2024, a half-percentage-point improvement from FY2023. Yet the CBO projects the figure will average between 3.1% and 3.6% of GDP over the long run, meaning the shortfall is now baked into the baseline rather than tied to a recession or emergency spending.
Total federal budget deficit reached $1.8 trillion in fiscal year 2024, or 6.4% of GDP. Looking ahead, Treasury and CBO estimates put the FY2026 total federal deficit at between $1.8 trillion and $2.1 trillion.
Entitlements and interest costs keep the gap open
Mandatory entitlement programs such as Social Security and Medicare, which grow automatically as the population ages, are driving the shortfall alongside interest payments on existing debt that keep compounding. What makes the current stretch unusual is that these deficits are persisting during a period of economic expansion, as revenue growth has not kept pace with the government's structural spending obligations.
There is also the question of sovereign creditworthiness. The US lost its top credit rating from S&P in 2011 and from Fitch in 2023.
Source: Crypto Briefing
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