The U.S. government ran a budget deficit of about $1.7 trillion for the 2023 fiscal year, which ended in September. That number, according to the Treasury Department, is up 23% compared to the year before. And there are some specific reasons that have to do with our current economic environment for why the deficit has increased.

Marc Goldwein is senior vice president and senior policy director for the nonpartisan Committee for a Responsible Federal Budget. He spoke with “Marketplace Morning Report” host Sabri Ben-Achour, and the following is an edited transcript of their conversation.

Sabri Ben-Achour: There were so many pandemic-era programs that have wound down. We had those relief payments, the tax credits. If those are gone, shouldn’t that have helped bring deficits down?

Marc Goldwein: Well, it has. 2020, 2021 — deficits were about $3 trillion a year. Over the last year, we borrowed $2 trillion. Deficits are down, they’re just not down nearly enough.

Ben-Achour: Why is that? The budget deficit is government spending more than it’s taking in. Is it growing because the government is spending more, or taking in less?

Goldwein: It’s a little bit of both. After surging revenue in 2022, 2023 actually saw revenue declined pretty substantially as a share of the economy. But, spending is also continuing to surge, especially in Social Security and Medicare, in part due to high inflation, and interest costs, which really are exploding out of control. And interest rates right now are about a percentage above even what was projected less than a year ago. If that continues, interest will be the second-largest government program by 2026. The only thing larger will be Social Security.

Ben-Achour: So taking a quick look at the money coming in, why has that fallen?

Goldwein: 2022 was actually an unusually strong year for revenue. We had huge capital gains because the stock market did so well the year before. We had huge taxable income because inflation boosts wages first, and it’s only indexed in the tax code on a delay. And so a lot of what happened last year, in 2023, was just to come down from that one-time surge. And, the Federal Reserve, which had been providing about $100 billion a year, is now actually losing money, thanks to higher interest rates.

Ben-Achour: So that brings us to the debt. The deficits that happen every year, those add up to become the national debt. How much debt is too much debt? Where is the line?

Goldwein: So I like to look at debt held by the public, which is about $26 trillion. About the same size as the economy. That’s twice what it’s been historically. Our debt is usually about half the size of the economy.

Where we hit the crisis probably isn’t a specific level. It’s the point that there’s no going back, the point that our trajectory is so out of control, that investors look at the United States and say, “There’s no way we can bring this back under control.”

And a couple years ago, I might have said, “We’ve got decades for that.” But that was when interest rates were 2%, 3%, 3.5%. Now that interest rates are 5%-plus in many cases, that day of reckoning may be coming much sooner.

Ben-Achour: There is so much drama and fighting in Congress right now over deficits, over the debt. But the only area where people seem to be talking about finding savings is discretionary spending. This is defense spending, funding for things like the EPA. If you put all that together, it is just a quarter of the budget. Is fiddling with that really going to solve anything?

Goldwein: Now look, so, we need to take discretionary spending seriously. But, as you mentioned, appropriations are actually only a quarter of the budget, and they’re not growing particularly fast. They’re growing quite slow under projections. The real issue is we need to address the cost of health care — Medicare, Medicaid. We need to address the cost of retirement, especially Social Security. And we need to look at the revenue side, at the $1.7 trillion of tax breaks we give every year.