The federal government's budget deficit reached $2 trillion for the current fiscal year as the deficit has widened by nearly $100 billion from last year.
The nonpartisan Congressional Budget Office (CBO) released its monthly budget update for August, which showed the deficit reached $1.989 trillion in the first 11 months of fiscal year 2025. That amounts to a $92 billion increase in the deficit when compared with the first 11 months of fiscal year 2024.
Overall, federal spending was up by $391 billion from a year ago, an increase of 5%, while tax receipts rose $299 billion, or 7%, in the first 11 months of fiscal year 2025.
The increase in federal tax receipts was largely attributable to the Trump administration's tariffs, which increased import taxes for many goods since February.
The federal budget deficit reached $2 trillion in the first 11 months of fiscal year 2025. (Kayla Bartkowski/Bloomberg via Getty Images / Getty Images)
The CBO said that customs duties collected were up $95 billion, or 137%, so far in this fiscal year compared with the same period in fiscal year 2024, and totaled $165 billion for the first 11 months of fiscal year 2025.
Individual income tax receipts were up by $181 billion, or 8%, and have totaled $2.357 trillion in fiscal year 2025 so far. Payroll taxes are up $48 billion, or 3%, and have totaled $1.615 trillion in the first 11 months of the fiscal year.
Corporate income taxes fell by $32 billion, or 8%, when compared with the same period last year. The CBO noted that natural disasters declared in fiscal year 2023 caused about $35 billion in corporate tax payments to shift into fiscal year 2024, which led to the apparent decline from last year.
Tariffs are taxes on imported goods that are paid by the importer, who typically passes the higher costs on to consumers through higher prices. (Qian Weizhong/VCG via Getty Images / Getty Images)
The federal government spent $6.7 trillion in the first 11 months of fiscal year 2025, and much of the $395 billion increase from last year was driven by mandatory spending programs like Social Security and Medicare, as well as the rising cost of debt service.
Payments of Social Security benefits were up $111 billion, or 8%, from the same period last year due to higher benefit payments from the annual cost-of-living adjustment (COLA) as well as a growing number of beneficiaries amid the aging of the U.S. population.
Medicare spending also increased by 8% and was $64 billion higher than the same period last year due to higher payment rates and a rise in the number of enrolled beneficiaries.
Interest expenses on the national debt were another major driver of the increase in spending and wider budget deficit, as net interest payments rose by $72 billion, or 8%, because the national debt is larger than it was last year.
For the month of August alone, the federal government ran a $360 billion budget deficit, a decrease of $20 billion from last year. July's monthly budget deficit was revised up by $2 billion to a total of $291 billion.
CBO noted that the federal government will record a spending reduction of about $130 billion in September that stems from changes made to federal student loan programs in the Trump administration's One Big Beautiful Bill Act.
Taking that budgetary move into account with the rest of its analysis, the CBO is currently estimating that the final budget deficit for fiscal year 2025 will total $1.9 trillion.
That would rank as the third-largest budget deficit in U.S. history, trailing only the fiscal year 2020 and Fiscal year 2021 deficits incurred during the COVID-19 pandemic.