Among the world's major advanced economies, the United States holds a distinction it would probably rather not claim: the largest primary budget deficit. The US figure came in at 7.6% of GDP in 2023, compared with an average of 4.6% among other OECD member countries.

The Numbers Behind the Gap

The primary deficit, which strips out interest costs to show how much the government is overspending on its actual operations, landed at 3.3% of GDP for FY2024. That represented a modest improvement, down half a percentage point from FY2023.

The Congressional Budget Office projects this figure will average between 3.1% and 3.6% of GDP over the longer term. In other words, this is not a temporary blip caused by a recession or emergency spending — it is the baseline.

The total federal budget deficit reached $1.8 trillion in fiscal year 2024, or 6.4% of GDP. Looking ahead to FY2026, the total federal budget deficit is expected to come in between $1.8 trillion and $2.1 trillion, according to Treasury and CBO estimates.

Why the Deficit Remains Stubbornly High

The usual drivers are behind the gap: mandatory entitlement programs such as Social Security and Medicare, which grow automatically as the population ages, and interest payments on existing debt that continue to compound. Net interest on the federal debt has grown large enough that it now ranks among the biggest single line items in the federal budget, a scale of debt-service cost the US has not carried since the early 1990s.

What makes the current situation unusual is that these deficits are persisting during a period of economic expansion. Typically, budget gaps narrow when the economy grows and unemployment is low, as tax receipts rise and safety-net spending falls. Revenue growth has simply not kept pace with the structural spending obligations baked into the federal budget.

Implications for Markets and Investors

There is also the question of sovereign creditworthiness. The US lost its AAA rating from S&P in 2011 and from Fitch in 2023, and in 2025 Moody's became the last of the three major rating agencies to strip the US of its top rating. Persistent primary deficits matter here because they indicate borrowing needs that continue even when the economy is strong, which in turn shapes the size and frequency of Treasury debt issuance — a supply dynamic that bond markets watch closely. Key markers ahead include the CBO's updated baseline projections, the Treasury's quarterly refunding announcements detailing issuance plans, and any fiscal legislation that would alter mandatory spending or revenue levels.