The projected federal budget deficit for fiscal year 2025 has surged to a jaw dropping $1.63 trillion. With just two months left in the fiscal year, this is an exceedingly urgent matter. This huge shortfall occurs despite a record high in government revenue, which has grown significantly—$4.35 trillion to date. The rosy revenue picture has seen an increase of 6.6 percent over the same time last year. This significant growth highlights a complicated fiscal picture.
Expenditures have skyrocketed—with a $48 billion increase over the past two bienniums. To answer the second question, the national government has already maxed out—to $5.98 trillion in fiscal 2025. That’s a bold 6.8 percent jump over last year. In July, the monthly budget deficit skyrocketed to a record $294.14 billion. That’s a shocking 19 percent increase over just the same month last year. Analysts are starting to ring alarm bells about these increasing numbers—in particular as it relates to how these numbers affect the U.S. creditworthiness.
Rising Interest Expenses
The cost of interest on the national debt, now the federal government’s second-highest expense, is an emerging existential threat. It’s a major driver of our budget deficit. In fiscal 2024, the U.S. government paid $1.13 trillion in interest expenses, marking the first time that this figure exceeded $1 trillion. In fiscal 2025, we have already surpassed total interest expenses at $1.01 trillion. That’s a 6 percent jump from the same time in 2024.
In just the month of July, interest on the national debt was $91.9 billion. The increasing costs of interest hold serious consequences. They are driving a net interest of $841 billion in the first ten months of fiscal 2025. With the national debt officially passing $37 trillion on August 11 — a day that should have triggered alarm bells — concerns over our fiscal sustainability are growing.
“Confidence in U.S. creditworthiness may be undermined by a rapidly deteriorating fiscal situation, an increasing concern with federal debt set to grow substantially in the coming years.” – Financial Analyst
Customs Duties and Revenue Growth
To be clear, this increase is not just due to rising federal tax collections. Customs duties have contributed significantly to our current revenue-generation picture. Fast forward to the first ten months of fiscal 2025, and the U.S. government collected $135.7 billion in customs duties. This remarkable assembly contributed greatly to accelerating revenue growth overall. This increased revenue is woefully inadequate to cover the skyrocketing pace of spending including interest expenses.
$629.64 billion In July 2024, That’s a jaw-dropping amount of money. This initial figure represents yet another record in terms of spending at this time. When federal revenues increased, so did the appetite for spending, leaving many concerned about long-term fiscal discipline and planning.
Implications for Future Fiscal Policy
This presents huge challenges for U.S. policymakers in our new fiscal reality. They need to contend with increasing deficits and an ever-increasing national debt. Given the unrelenting growth in interest costs and total spending overall, it’s clear that if we don’t act now, our fiscal future will get even worse.
As analysts note, confidence in U.S. creditworthiness is central to our economic foundation. The cocktail of high and persistent deficits alongside rising debt levels sparks red flags over the cost of future borrowing and potential negative downstream consequences for the economy.