US budget deficit swells, posing early challenge for Trump’s comeback

In October, the US budget deficit surged nearly fourfold to $257 billion, driven by one-off factors, according to a Department of Treasury report released on November 13.

The sharp rise, starting off the 2025 fiscal year, leaves a substantial financial challenge for President-elect Donald Trump in January, Caliber.Az reports, citing foreign media.

According to the Treasury, the October deficit jumped 287% from $67 billion a year prior, though 2023’s figures were lowered by calendar shifts and deferred tax payments from California wildfire impacts. Without these adjustments, the deficit would have been approximately $47 billion, or 22% higher than October 2023.

The US leader, who managed a record $3.1 trillion deficit during the COVID-19 crisis in 2020, has appointed Elon Musk and Vivek Ramaswamy to head a new initiative targeting government spending cuts. Musk has suggested trimming federal expenses by $2 trillion, without specifying a timeframe.

While Social Security, Medicare, and military costs rose, a decline in inflation-adjusted debt service costs led to an 8% drop in public debt interest payments for October. Yet, net interest on public debt still climbed to $80 billion, up $4 billion year-on-year. Market worries about Trump’s tax cut proposals have also pushed the 10-year Treasury yield up by 15 basis points.

Notably, the US budget deficit has been driven by several key factors in recent years. While COVID-19 relief spending decreased in 2023, its effects continued to impact the budget, with ongoing costs for direct payments, extended unemployment benefits, and business support. A major contributor to the deficit has been the rising cost of servicing the national debt, as interest payments exceeded $1 trillion for the first time in 2023, becoming the second-largest federal expense after Social Security.

Social Security and Medicare, the largest entitlement programs, have seen rising costs due to the ageing population, further increasing the deficit. Military spending also remains high, with significant allocations for defence operations and procurement of new equipment. Additionally, the Bipartisan Infrastructure Law, signed by President Biden, has added to federal spending through investments in roads, bridges, and public transport.

Together, these factors have continued to push up the US budget deficit despite efforts to control spending.

By Khagan Isayev