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If you thought America’s debt problem couldn’t get any worse, buckle up — because the latest numbers show the federal budget deficit is climbing faster than expected. Despite the government raking in more money from tariffs and taxes this year, spending has grown even more — and the gap between the two is now a staggering $1.6 trillion for the first 10 months of the fiscal year 2025. That’s $109 billion more than where we were at this point last year.
A bigger hole in the nation’s wallet
The Congressional Budget Office (CBO) released its latest monthly budget update for July, and the picture isn’t pretty. From October 2024 through July 2025, the U.S. government spent far more than it took in, widening the deficit.
To put it in simple terms: Imagine you got a raise this year, but you also started spending more than ever before. Even though you’re earning more, you’re still falling deeper into debt — and that’s exactly what’s happening at the national level.
Yes, revenue is up — but spending is up even more
Here’s the part that might surprise you: The government actually took in $263 billion more in taxes this year than last year, a jump of 6%. The main boost came from tariffs—taxes on imported goods — which brought in an extra $70 billion. That’s a 112% jump compared to last year, thanks to the Trump administration’s decision to raise tariffs on many foreign imports.
Individual income and payroll taxes also went up by $214 billion, or 6%, as more people earned income and paid taxes.
However, not all revenue sources improved. Corporate taxes fell by $27 billion, or 7%, compared to the same 10-month stretch in 2024.
Tariffs: More money for Washington, more costs for you
While higher tariffs mean more money in government coffers, they also mean higher prices for consumers. Importers often pass those costs on to the rest of us, so whether you’ve noticed it or not, the price tags on certain goods may already be feeling the tariff effect.
It’s like the government charging the shop owner more for goods, and the shop owner raising prices to cover the difference. The extra money might help reduce the debt on paper — but in reality, your wallet feels lighter.
Where the extra spending went
Unfortunately, all that extra revenue was quickly swallowed by bigger expenses. Federal spending jumped by $372 billion in the first 10 months of FY2025 — a 7% rise from last year.
The biggest cost increases came from:
- Social Security: Up $102 billion (8%) due to higher monthly benefits from the annual cost-of-living adjustment (COLA) and more retirees collecting cheques as America’s population ages.
- Medicare: Up $58 billion because more people are enrolled, and service payment rates are higher.
- Medicaid: Up $47 billion as the cost of caring for each enrollee has risen.
- Interest on the national debt: Up $60 billion (8%) because the debt is bigger than it was last year — now nearing a mind-boggling $37 trillion.
A growing cost just to owe money
Here’s the kicker: we’re now spending tens of billions of dollars more just to make interest payments on the debt. It’s like putting more on your credit card each year and also paying more in interest because your balance is so high.
As of August 7, 2025, the National Debt Tracker shows that every American taxpayer is essentially responsible for $36,950,459,859,111.56 — yes, that’s over $36 trillion and counting.
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July was another bad month
The month of July alone saw a deficit of $289 billion — $45 billion higher than in July 2024. Spending rose faster than tax collections, which means the government’s financial gap widened even in the middle of the year.
There was one small piece of good news: The surplus for June 2025 came in at $27 billion, which was actually $1 billion higher than earlier estimates. But that tiny win is like finding a $5 bill in your couch cushions after realizing you’re $5,000 behind on your mortgage.
Political fights ahead
These numbers are sure to spark heated debates in Washington about how to rein in spending — or whether to raise the national debt ceiling yet again. Republicans have been pushing Trump’s signature tax cuts, while others warn that without serious changes, America is heading toward what billionaire investor Ray Dalio calls an “economic heart attack.”
The challenge is that every major spending category — Social Security, Medicare, Medicaid, and debt interest — is politically sensitive. Cutting them would be unpopular, but letting them grow unchecked pushes the deficit higher.
Why this matters for you
You might be thinking: “I don’t work for the government, so why should I care?” But here’s the thing — deficits and debt affect everyone.
- Higher inflation risk: More government borrowing can fuel higher prices over time.
- Higher taxes later: Eventually, the bill comes due, and that could mean more taxes in the future.
- Less money for other priorities: As interest payments grow, there’s less left for things like education, infrastructure, or disaster relief.
Think of it as your household budget: If most of your money goes to paying off credit card interest, there’s less left for groceries, rent, or fun.
