The U.S. budget deficit for fiscal 2025 came in at a cool $1.78 trillion, which—believe it or not—is actually an improvement. That’s $41 billion less than last year’s shortfall, according to the Treasury Department. So yes, technically, we’re spending less than we were. But before you start high-fiving your accountant, let’s unpack what’s really going on.
Tariffs to the Rescue (Sort Of)
The biggest surprise? Tariff revenue. Thanks to a fresh round of import duties from President Donald Trump, the government raked in a record $202 billion in customs duties—up a whopping 142% from 2024. September alone saw $30 billion in tariff payments, a 295% year-over-year jump.
That’s a lot of cash from taxes on foreign goods. And while critics warned the tariffs would spike inflation and hurt consumers, the price bumps have been more of a slow simmer than a boil. The Federal Reserve says any inflationary effects are likely temporary and is even eyeing another rate cut. The current fed funds rate sits between 4.00% and 4.25%.
Debt Payments: The Elephant in the Room
Now for the not-so-fun part: interest on the national debt. The U.S. shelled out more than $1.2 trillion in interest payments this year—another record, and nearly $100 billion more than in 2024.
Net interest payments (after subtracting what the Treasury earns) hit $970 billion, which is more than we spent on defense and just behind Social Security, Medicare, and healthcare. That’s right—debt payments are now one of the biggest line items in the federal budget. Yikes.
Deficit-to-GDP: Slightly Less Ugly
The deficit-to-GDP ratio dipped to 5.9%, its lowest since 2022. That’s still high by historical standards—normal times hover around 3%—but it’s a step in the right direction. Treasury Secretary Scott Bessent is optimistic, saying "we’re on our way" to reducing the debt burden.
Still, with the national debt now at $38 trillion, it’s hard to feel too celebratory. That’s a lot of zeros, folks.
Revenue vs. Spending: The Classic Gap
For the fiscal year ending in September, the government collected $5.2 trillion in revenue and spent just over $7 trillion. So yes, we’re still spending like it’s Black Friday every day, but at least we’re not breaking last year’s deficit record.
The Bottom Line
The U.S. budget deficit may have edged lower, but it’s still deep in the red. Tariffs helped plug some holes, but rising debt payments and persistent spending gaps mean we’re far from fiscal paradise.
So while the Treasury’s report offers a glimmer of hope, don’t expect a parade just yet. The real question is whether this trend continues—or if we’re just catching our breath before the next sprint into deficit territory.