The U.S. federal budget deficit has surged to a record $711 billion in the first three months of the fiscal year, marking a 39% increase from the $510 billion deficit recorded during the same period last year, according to the Treasury Department.
This rise in the deficit is partly due to government spending, which reached a record $1.8 trillion in the first quarter, reflecting a 39% increase from the previous year.
The increase was also influenced by the shift of benefit payments into December. Notably, spending on the Department of Homeland Security rose by 41% due to disaster relief following the devastating 2024 Atlantic hurricane season.
The federal government’s interest payments also increased significantly, totaling $308 billion, a $20 billion rise from last year. The Federal Reserve’s interest rate hikes in 2022 and 2023 have led to higher debt payments, which are now the fourth-largest sector of government spending, behind Social Security, defense, and healthcare.
Economists are concerned about the sustainability of the U.S. budget deficit. Projections from the Congressional Budget Office suggest the deficit for fiscal 2025 could increase to $1.94 trillion, or 6.5% of GDP. Many are questioning the long-term impact of such deficits on the economy, especially as long-term interest rates have been rising in anticipation of larger deficits.
