The US federal budget deficit hit a new high, and the first fiscal quarter increased 39% year over year

The Zhitong Finance App learned that the US Treasury Department said on Wednesday that in the first three months of this fiscal year, the US federal budget deficit widened to a record 711 billion US dollars, an increase of 39% over the 510 billion US dollars in the same period last year. Spending for the first quarter of this fiscal year reached a record $1.8 trillion, up 39% year over year, while revenue for the same period was $1.1 trillion, down 2% year over year. Part of the increase in expenses was due to the advance of benefit payments from January 2025 to December 2024.

The US Department of Homeland Security's spending increased 41% year over year, partly due to post-disaster relief for the 2024 Atlantic hurricane season. Federal debt interest expenses for the first three months were $308 billion, an increase of $20 billion over the same period last year. The Federal Reserve's rapid rate hikes in 2022 and 2023 have drastically raised debt payment costs, and interest expenses have now become the fourth largest expenditure item after social security, defense, and health care.

The US Congressional Budget Office predicted in June last year that the 2025 fiscal year deficit would rise to 1.94 trillion US dollars, accounting for 6.5% of gross domestic product (GDP), up from 1.83 trillion US dollars last year. The CBO is expected to release a new deficit forecast this Friday. Federal Reserve Chairman Powell said that the long-term outlook for the US budget deficit is unsustainable. Many Wall Street economists are concerned about this. Historical data shows that when the economy is strong, the US usually doesn't have such a large deficit.

Carl Weinberg, chief economist at High Frequency Economics, believes that inflating public debt is currently the most urgent risk facing the US economy and financial security. Long-term interest rates have risen over the past few months, partly due to market expectations that the deficit will widen further.

The deficit is likely to increase further. US President Joe Biden promised that every effort will be made to help residents and businesses affected by the Los Angeles area wildfires recover. Meanwhile, incoming Trump plans to promote policies that promote economic growth. According to Wells Fargo's chief economist Jay Bryson, the tax cuts could push the deficit to 7% to 9% of GDP. However, Trump's candidate for Treasury Secretary Scott Bessent said he wants to cut the deficit to 3% of GDP.

Trump also set up an advisory body called the “Government Efficiency Office” (DOGE), and appointed Tesla (TSLA.US) and X CEO Musk and former Republican presidential candidate Vivek Ramaswamy to cut government spending by $2 trillion over two years, equivalent to more than 30% of the federal budget. Experts questioned this. Jason Furman, a former economic adviser to the Obama administration and an economist at Harvard University, believes it may be difficult for DOGE to achieve significant results in cutting spending until it is dissolved in July 2026.