Bad news for the deficit: CBO confirms the gap is widening

Bad news for the deficit: CBO confirms the gap is widening CBO warns rising spending and debt costs are fuelling a $2 trillion shortfall in 2025. The Deficit Hits $2 Trillion The budget deficit of the U.S. government is swelling once again. According to the latest report from the Congressional Budget Office (CBO), the federal deficit has hit $1.989 trillion in the first 11 months of fiscal year 2025. That's roughly $92 billion more than the same period last year. In other words, the government is spending far more than it's receiving. And the deficit is now so big it's becoming hard to ignore. Where the money is goingThe federal government spent a record $6.7 trillion between October 2024 and August 2025. That's $395 billion more than last year, or about 5% more. So, why the extra spending? A few big programmes: Social Security – Payments rose by $111 billion, thanks to cost-of-living adjustments (COLA) and more retirees claiming benefits. Medicare – Spending rose by $64 billion, mostly because of higher payment rates and more enrolments. Interest on debt – The national debt keeps rising, so the government is paying more just to cover the interest. Those payments rose by $72 billion this year. It’s like using a credit card too much—you end up spending more money just to pay the interest. Where the money is coming from Even though spending is climbing, the government is also collecting more money from taxes. In fact, revenues went up by $299 billion compared to last year, a 7% increase. Here’s how that breaks down: Individual income taxes rose by $181 billion (up 8%), totalling $2.3 trillion so far. Payroll taxes rose by $48 billion (up 3%), to $1.6 trillion. Customs duties (tariffs) rose by 137%, to $165 billion. This huge rise resulted from higher import taxes levied on goods earlier this year. Not everything rose, though. Corporate taxes declined by $32 billion, partly because tax payments from 2023 disasters shifted into 2024.Tariffs: A hidden tax A lot of the revenue growth came from tariffs. They're essentially taxes on foreign products brought into the US. Importers pay them initially, but the heightened expenses generally get passed on to consumers in the form of higher prices. So, as the government collected $95 billion more in tariffs this year, that likely also means Americans are paying more for everyday items. August snapshotLooking at August alone, the government ran a $360 billion deficit. That is $20 billion lower than August of last year. July's figures, however, were revised upward, to a $291 billion deficit for that month. In September, the CBO expects spending to decrease by about $130 billion because of changes in the federal student loan program. That adjustment comes because of the Trump administration's One Big Beautiful Bill Act. The bottom-line 2025 projectionAfter crunching all the numbers, the CBO estimates the total 2025 budget deficit at roughly $1.9 trillion. That would be the third-largest deficit in U.S. history, behind only 2020 and 2021, when massive pandemic spending pushed the gap to all-time highs. Why it matters A growing deficit doesn't just look bad on paper—it has real effects. The larger the gap grows, the more the government borrows. And the more it borrows, the more the national debt grows. Which translates to: Must read Careful where you put your hands: drivers face $100 fine over new “touch” laws Market guru says this legendary sportswear brand is a buy once more Good news for home buyers: mortgage rates are tumbling – fast Lowe’s bets big on tech, offering six-figure salaries for IT talent How to land $250 from CapitalOne: open this account and meet these simple requirements $10,000 for cost-saving ideas: Treasury and GSA launch cash rewards for federal workersThe Bottom LineThere's some tough news in the new CBO update: the government is spending more than it's receiving, and the deficit is widening. In spite of higher tax revenues and more revenue from tariffs, the rises in Social Security, Medicare, and interest payments on the debt are pushing the gap higher. By the end of this fiscal year, America's deficit is likely to total $1.9 trillion, one of the biggest ever. And unless something changes, the red ink could keep flowing for years to come.