Taking stock of the US federal budget
Image: Brookings
Last week, the books officially closed on the US government’s fiscal year. And we now have some data to see how America’s finances performed in FY 2025, thanks to new year-end figures released Wednesday by the nonpartisan Congressional Budget Office.
The baseline figures
Overall, the federal government logged a $1.8 trillion budget deficit for the 2025 fiscal year, essentially unchanged compared to FY 2024 despite a historic rise in tariff revenue.
That’s largely because the main drivers of gov’t spending continued to rise: social programs like Medicare and Social Security, and interest on the public debt, which crossed $1 trillion/year for the first time according to the CBO.
Some other highlights from the new FY 2025 data:
- Tariff collection rose from $77 billion in FY 2024 to $195 billion this past fiscal year, with customs duties now representing 3.7% of overall federal revenue.
- While the Elon Musk-led Department of Government Efficiency (DOGE) touted the potential for massive spending cuts, they failed to fully materialize: Total US gov’t spending (excluding interest) rose by $220 billion, or 4%, compared to FY 2024.
- One area that did see major cuts was the Education Department, where spending decreased by 87% ($234 billion), largely related to changes in student-loan accounting and President Trump’s executive orders shuttering much of the department’s funds.
US deficits remain historically high
The new data also sheds light on America’s growing debt and deficit—particularly the federal deficit as a ratio of GDP, a key gauge used by experts to monitor the US government’s fiscal sustainability.
- CBO data shows the deficit stood at ~5.9% of US GDP last fiscal year, down slightly from 6.4% the previous year.
- Ratios this high are unprecedented in modern US history, outside of crises or economic downturns, Bloomberg reports.
Looking ahead…Treasury Secretary Scott Bessent says he wants to shrink the deficit-to-GDP ratio to a level near 3% by 2028, Trump’s final year in office.
📊 Flash poll: When it comes to America’s finances, would you say the US gov’t is generally heading in the right direction, or do you think things are generally on the wrong track?
See a 360° view of what pundits are saying →
Sprinkles from the Left
- Some commentators argue that Trump’s failure to provide a budget plan for FY 2026 and beyond shows that he has no real plan to address major upcoming challenges like the funds that support Social Security and Medicare becoming insolvent within the next decade.
- Others contend that the ongoing gov’t shutdown and related partisan bickering in recent years has overshadowed real questions about how long America can keep operating as revenue fails to keep up with a recent and dramatic expansion of government.
- “The Case of the Missing Federal Budget” –Olivier Knox, US News & World Report
- “The shutdown conversation no one wants” –WaPo Editorial Board
- “Worry about the economy more than the federal debt” –Dean Baker, Duluth News Tribune
Sprinkles from the Right
- Some commentators argue that the small silver lining of CBO’s otherwise glum report is that the deficit is slightly lower compared to the previous year—but the spending side of the ledger is also uglier than the headline numbers suggest.
- Others contend that once again, the budget numbers reveal that America has a spending problem, not a revenue shortage, as tax receipts in FY 2025 soared by $300 billion, but increases in spending gobbled it all up.
- “The Latest Beltway Deficit: $1.8 Trillion” –WSJ Editorial Board
- “The sea of red ink continues to proliferate” –Las Vegas Review-Journal Editorial Board
- “Shutdowns, pandemic-level spending: New normal?” –Veronique de Rugy, The Express
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