The numbers are in, and America’s fiscal situation remains as dismal as ever. The Congressional Budget Office (CBO) has completed its review of fiscal year (FY) 2025 (which ended in September), published the results, and confirmed once again that “Congress” is pursuing the opposite of “progress.” After all the hype over the Republican trifecta’s reform agenda, frenetic DOGE cuts, and federal workforce layoffs, the U.S. federal government ran a deficit in FY2025 of $1.8 trillion — pretty much the same as FY2024.

In fairness, the lame duck Biden administration spent the first third of the fiscal year shoveling money out the door as if a bank robber held them at gunpoint. And some cost-saving measures adopted by the Trump administration — such as deferred separation for federal employees — did not take effect until after the fiscal year ended. Nevertheless, digging into the numbers reveals deeper, structural problems that will require a more fundamental solution. Here are four takeaways from the report.

1. The U.S. government’s huge deficit isn’t going anywhere.

The most basic lesson from the data is that the U.S. government runs a gargantuan annual deficit, which current policies are doing nothing to mothball. The CBO estimated the FY2025 deficit at $1.8 trillion (with a T). This was technically a decline from FY2024, but only by a rounding error. The federal deficit declined by a mere $8 billion (with a B), less than half of one percent.

Adjusting for a calendar anomaly (FY2024 began on a Sunday, so the first days’ worth of FY2024 payments were made in FY2023), the FY2025 deficit declined $80 billion from FY2024, which is larger by a factor of 10, but still only a 4% decline.

The similar numbers, combined with the news highlights of 2025, might lead an informed reader to guess that government income and spending stayed about the same, with some minor cuts. But that guess would be wrong. In fact, both revenues and expenditures increased. “Revenues increased by an estimated $308 billion (or 6 percent),” wrote the CBO, while “Outlays rose by an estimated $301 billion (or 4 percent).” Both revenues and outlays exceeded CBO estimates made in January.

Thus, the numbers tell an unexpected tale. After a year of focus on cutting costs and trimming the waste, fraud, and abuse out of government, federal spending actually increased! The modest decline in the deficit was solely due to the fact that federal tax revenue increased even more.

2. The U.S. government’s interest is growing more expensive.

What factors contributed to this increase in federal spending? One significant factor was the net interest paid on public debt, which increased by $80 billion (8%) from FY2024 to FY2025, coming in at $1.03 trillion for the year. In contrast to recent years, where interest payments rose because of rising interest rates, this year’s jump, was “mostly because the debt was larger than it was in fiscal year 2024,” wrote the CBO.

Ever since the Great Recession, Congress has profligately expanded the national debt — and especially since the COVID pandemic. This profligacy was abetted by Federal Reserve policies that kept interest rates artificially low, thereby making interest payments cheaper. With the mild rise of interest rates in response to Bidenflation, however, the federal balance sheet began to feel the true cost of that irresponsible debt, and Congress has yet to address the growing problem with any urgency.

In FY2025, for example, Republican majorities negotiated for six months over how to achieve real cost savings for the American people. The result of those negotiations was the “Big Beautiful” reconciliation bill, in which only the slimmest of cost savings survived. Despite the cuts made, federal spending actually increased, resulting in approximately the same appalling deficit as last year — a deficit so large that the net interest payments amounted to a substantial increase in federal expenditures. This is a spiraling problem that will persist until Congress finally gets serious enough to make cuts deeper than these inevitable increases in spending.

3. The Trump tariffs substantially increased tax revenues.

Of course, there are two ways to reduce a deficit: reducing spending (traditionally the Republican solution) or raising taxes (traditionally the Democratic solution). This Republican administration has embraced tax increases in the form of tariffs, and those tariffs have brought in a considerable amount of revenue. The CBO reports that revenue from customs duties such as tariffs increased by $118 billion in FY2025, or 153%.

Unfortunately, tariffs suffer from the same drawback as all forms of taxation in that they reduce economic efficiency, thereby dampening economic growth. Even though tariffs are technically levied on international producers, those costs are largely passed on to American consumers in the form of higher prices.

Nevertheless, the CBO year-end analysis suggested that America’s economy continued to grow in FY2025. Income and payroll taxes withheld from paychecks rose by $185 billion (6%), they estimated, while nonwithheld individual tax payments increased $95 billion (9%). According to the CBO, this increase in tax revenue was not due to higher tax rates but was instead “a reflection of rising wages and salaries.” (In the other direction, corporate tax revenue decreased by $77 billion, 15%, due to changes in the reconciliation bill that allowed corporations to take larger deductions.)

4. U.S. government entitlement spending remains the biggest fiscal challenge.

Overall, however, these significant increases in tax revenue could just barely keep pace with the items in the federal budget where prices are ballooning most quickly: entitlement spending. According to the CBO, FY2025 expenditures rose by $121 billion (8%) for Social Security benefits, $72 billion (8%) for Medicare, and $52 billion (also 8%) for Medicaid, reflecting America’s aging population.

These numbers dwarf the spending for any executive department. The largest spending increases came in the Departments of Veterans Affairs (increase of $41 billion, or 12%), Defense (increase of $38 billion, or 5%), and Agriculture (increase of $28 billion, or 14%). (On the positive side, the Department of Education saw its costs reduced by $234 billion, or 87%, mostly due to a reduction in federal student loans.)

Comparatively, however, entitlement programs are really the force driving America towards a fiscal cliff. Without any policy changes, they simply grew on their own by 8%, costing the federal government an extra $200 billion per year — not to mention the interest the government must then pay on that unpaid-for spending. Entitlement programs will continue to expand, year after year, until Congress finally sees fit to address them (members of Congress could address it now, but most lack the political will to do so).

Given America’s wan and worsening fiscal picture, the current shutdown debate in Congress is utterly absurd. Republicans have put forward a “clean CR,” a simple proposal to keep funding the government at the current, unsustainable levels of deficit spending, for six more weeks of negotiations. But Democrats have refused that offer, insisting instead on an additional $1.5 trillion in new spending over the next decade, mostly for health care entitlement subsidies.

The most fundamental question is this: while Congress obsesses over its seating arrangement on the Titanic, does anyone see the massive fiscal iceberg ahead?