The United States federal budget deficit is nearing a historic high, even in the absence of a budget agreement.
December Budget Deficit
The budget deficit in December was 129.3 billion (the second worst result after December 2020), and for October - December (2023), it was 510 billion.
For calendar 2023, the deficit was 1.8 trillion, or 2.1 trillion, when adjusted for the paper deduction for student advances, which is the level we should expect.
Budget Deficit Real Terms Comparison
Interestingly, in real terms, the budget deficit over the last 12 months is on par with the 2009 crisis. The U.S. budget is closely aligned with the crisis, except for the anomalies in 2020 - 2021.
The main drivers of spending growth are interest payments, pensions, defense, and support for the banking system.
For example, in FY 2024 (October - December 2023), spending grew 12% over the previous year, or 170 billion, with interest spending up 71 billion in three-month terms over the same period in 2022, pensions and veterans' support up nearly 50 billion, spending to support the banking system up more than 60 billion, and defense spending adding 24 billion.
Combined, the above categories accounted for more than 205 billion in spending growth, accounting for 58% of total spending, meaning that other categories are generally declining at face value.
Conclusion
What does all this mean? The budget is highly unsustainable in a sterile environment, and what if there is a crisis? We will have to heavily subsidize the population (the main source of spending growth in a crisis), and that's with a background deficit of 2 trillion for the year.
The situation is extremely vulnerable to fiscal sustainability amidst the exhaustion of excess liquidity in the system.