Marking an ominous weigh mark on United States President Donald Trump’s first month in office, the U.S. budget deficit continued to rise in February, with the shortfall now hitting US$1.15 trillion over the first five months of the current financial year.
Deficit growth of $307 billion in February alone - due to the increasing cost of Medicare and servicing government debt - undermines the Trump administration’s plans to extend, and expand upon, his 2017 tax-cut package that expires at the end of 2025.
While supporters of proposed tax cuts argue the dangers of extending them, Republicans may advocate additional offsets to keep the fiscal debt picture from escalating.
While Trump expects tax reductions to herald major economic growth, it may come at a cost: Economic forecasters believe renewing the Tax Cuts and Jobs Act – spearheaded during his first administration - would add $3.3 trillion to the deficit over the next decade.
Government spending eased slightly month on month, however, it is still around two and a half times the amount in January and 3.7% higher than in February 2024.
For the first five months of financial year 2025, the deficit total is a record 38% ($318 billion) higher than the same period in 2024.
While net costs associated with financing the $36.2 trillion national debt edged lower to $74 billion for the month, the total net interest payments year to date rose to $396 billion, just behind national defence and health.
Overall, the key categories representing the biggest spending increases were:
- The Medicare program, where costs for the past five months climbed by $124 billion from the previous financial year, to $518 billion.
- Interest on the public debt increased by $45 billion to $478 billion.
- Social Security outlays rose by $49 billion to $663 billion.
Getting the government’s financial house in order remains a top priority for Trump.
During the final three years of former President Joe Biden’s administration the deficit ballooned from $1.38 trillion to $1.83 trillion.
However, it remains unclear if the Elon Musk-led initiative to pare back federal spending – via the Department of Government Efficiency - is having a material impact on the budget numbers.
As of February, the 10% surtax on Chinese imports imposed last month had yet to come into play.
