The US budget deficit for the first four months of fiscal year 2025 reached 840 billion US dollars! Trump pushes for the administration to “slim down”

The Zhitong Finance App learned that due to increased spending in health care, social security, veterans benefits, and debt interest, the US federal budget deficit for the first four months of fiscal year 2025 reached a record 840 billion US dollars. The US Treasury Department said in a statement on Wednesday that in January 2025 alone, the budget deficit increased by 129 billion US dollars. After adjusting for calendar differences, the cumulative deficit from October 2024 to January 2025 increased by 25%.

Despite strong economic growth and continued growth in employment in the US, the budget deficit continues to widen. This shows the difficult tasks facing US Treasury Secretary Bezent. He is trying to reduce the deficit to 3% of gross domestic product (GDP) from 6.4% in 2024.

Interest on debt is a key factor in the US federal budget deficit, as the Treasury uses securities with much higher interest rates to refinance low-yield maturing debt. This is due to rising inflation in recent years and the Federal Reserve's interest rate hikes in 2022 and 2023. The data shows that from October of last year to January of this year, interest costs reached 392 billion US dollars.

According to data released by the US Congressional Budget Office (CBO) last month, the US federal budget deficit will reach 1.865 trillion US dollars in fiscal year 2025, accounting for 6.2% of gross domestic product (GDP). Furthermore, the Congressional Budget Office predicts that in 2035, the US federal budget deficit will rise to 2.7 trillion US dollars, highlighting the challenges facing US fiscal policy in the next ten years.

The widening budget deficit is likely to strengthen the determination of Republican fiscal hawks to demand drastic spending cuts from the Trump administration in exchange for their support for the major tax cuts Trump is seeking this year. On Wednesday, the U.S. House Budget Committee published the text of the draft budget resolution. Among them, the draft seeks to cut mandatory spending such as Medicaid, the public health insurance program Medicaid and agricultural subsidies by $2 trillion.

Trump Administration “Slimming Down” Musk: Saving the Government $1 Trillion Dollars

The White House said on Tuesday that Trump signed an executive order to cut federal workers. The order requires US federal agencies to develop plans to lay the foundation for mass layoffs of government workers.

The White House said that Trump's executive order will force US federal agencies to work with Musk's Department of Government Efficiency (DOGE) team to determine large-scale layoff plans and determine which institutional departments may be completely eliminated. The new order also requires government agencies to hire no more than 1 new employee for every 4 employees leaving their jobs.

Trump stated in the executive order that in order to fulfill its responsibilities to the American public, the order initiated a major transformation of the US federal bureaucracy. “By eliminating waste, bloat, and rigidity, my administration will strengthen America's families, workers, taxpayers, and our government system itself.”

This move is the latest move by Trump and Musk to “slim down” the US government. Musk also promised that he would save the government $1 trillion by working to uncover fraud and waste in the government.

However, despite Trump and Musk's slimming reforms aimed at reducing government spending, reducing deficits, and boosting economic growth, they are still facing legal challenges, questions about conflicts of interest, and public concerns about transparency. Furthermore, it is unclear whether the Ministry of Efficiency of the Government has the authority to carry out large-scale layoffs. And a large number of government civil servants belong to trade unions, which means that any large-scale layoffs must be carried out through collective bargaining agreements with trade unions.