The federal budget sank further into red ink during December, leaving the first fiscal quarter deficit nearly 40% higher than it was the prior year. The shortfall totaled $86.7 billion, a 33% decline from the same period a year prior. However, this brought the three-month fiscal year total to $710.9 billion, $200 billion more than the comparable period in the prior year.
Rising financing costs, continued spending growth, and declining tax receipts have combined to send deficits spiraling, pushing the national debt past the $36 trillion mark. Short-term Treasury yields have held fairly steady over the past month, but rates at the far end of the duration curve have surged, with the benchmark 10-year note yielding close to 4.8%.
Outlays during the first quarter were 11% higher than a year ago, while receipts fell by 2%. Interest on the national debt has totaled $308.4 billion in fiscal 2025, up 7% from a year ago. Financing costs are projected to top $1.2 trillion for the full year, surpassing 2024’s record.
The government has spent more on interest payments than any other category but Social Security, defense, and health care.
