The U.S. federal deficit rang in at $711 billion for the first quarter of Fiscal Year (FY) 2025, according to the monthly statement the U.S. Treasury Department released Tuesday. Such deficit spending, which surpassed 65% of federal receipts so far this year ($1.083 trillion), is totally unsustainable, but Congress has yet to figure out how to stop it.
October to December 2024 registered the highest first-quarter deficit of the decade so far (the federal fiscal runs from October 1 to September 30), exceeding FY2024’s first-quarter deficit by $201 billion, a 39% increase. It even marks a dramatic escalation from the $573 billion deficit-to-date in FY2021, when Congress was tripping over itself to vomit out stimulus packages during the COVID pandemic.
Even before the pandemic, the U.S. federal debt was growing by about $1 trillion annually, through both unreformed entitlement spending and bloated federal budgets. After an irresponsible spending spree in 2020 and 2021, the budget deficit has declined but still remains around $2 trillion annually. Over the last calendar year, the U.S. federal government added $1.9 trillion to the federal debt (from $26.8 trillion in December 2023 to $28.7 trillion in December 2024).
However, the federal debt may grow much faster this year, based on the first quarter of FY2025. If the rate of deficit spending from October through December holds constant ($700 billion in a quarter), the total deficit for the year will surpass $2.8 trillion.
What is causing the deficit to grow so large?
One suspect is the interest paid on the national debt, which is increasing because of both the rising debt and higher interest rates. But this is only part of the story. Net interest payments for the first quarter of FY2025 totaled $242 billion, making it the fourth-largest category after Social Security ($374 billion), National Defense ($262 billion), and Health ($246 billion), and slightly larger than Medicare ($233 billion).
In the first quarter of FY2024, net interest payments totaled $216 billion, so net interest payments only rose by $26 billion. Meanwhile, spending also rose substantially in nearly every other category: Medicare spending for the first quarter was $65 billion higher than the same point in the last fiscal year, Social Security spending was $23 billion higher, national defense was $24 billion higher, veterans was $24 billion higher, health was $21 billion higher, and income security was $19 billion higher.
In other words, spending was elevated across the board, in nearly every category, while revenues were down modestly (around $25 billion), due primarily to deferred payments.
On September 25, the House and Senate by overwhelming margins both passed a bipartisan continuing resolution that kept the government open and extended federal spending through December 20, roughly the same period that saw such a massive deficit. A continuing resolution authorizes the government to continue spending at or slightly above existing levels.
In this case, existing spending levels were set by Democrats when they controlled both chambers of Congress in 2021-2022. The question many voters want answered is why Republicans, who controlled the U.S. House in 2023-2024, failed to deliver more fiscal responsibility to the federal budget-making process.
The answer lies partially in the Republicans’ narrow majority and, ironically, partially with the fiscal hardliners themselves. Due to Republicans’ narrow control of the lower chamber, House leadership could only move conservative legislation through the chamber if it had the support from nearly every member of their conference. As a result, the House quickly got behind the 8-ball on passing the appropriations bills in regular order, so it resorted to short-term spending bills to keep the government funded.
A handful of fiscal hardliners got so fed up with these delays that they refused to go along with any more short-term spending packages, even if it meant a government shutdown. Most of the conference believed that a shutdown would be politically disastrous, and they were willing to support any funding bill that could make it through the chamber. That meant working with Democrats, which meant jettisoning conservative policy provisions.
By refusing to work with their own party to pass conservative spending bills, the fiscal hardliners unintentionally ensured that the Republican-controlled House would actually pass spending legislation that was less conservative than it could have been, causing the government to take on more debt than it would have otherwise. In pursuit of ideological purity, some of Congress’s most conservative members lost the game of political chess.
While Congress bears most of the responsibility for the dramatic accumulation of trillions in public debt, especially over the past five years, one non-congressional factor could explain the short-term jump in the first quarter of FY2025, covering October through December.
Namely, the Biden administration is hurrying to squeeze out every last penny of authorized spending before the Trump administration takes over on Monday, as part of their design to “Trump-proof” Washington. But could rush jobs really account for the $200 billion increase in the first-quarter deficit? Ensuing quarters will answer that question by whether the deficit remains elevated, or averages out for the year.
The Biden administration can determine not whether the money is spent but only when. Ultimately, it is up to Congress to extinguish the fiscal wildfire raging in Washington, D.C.
Joshua Arnold is a senior writer at The Washington Stand.