Federal Deficit Reaches $1.8 Trillion as U.S. Interest Payments Top $1 Trillion for First Time

Key Facts

Published: October 8, 2025 Location: Washington D.C. Source: Washington Examiner, Bloomberg

• Federal deficit for FY2025 estimated at $1.8 trillion, barely below last year’s record.
• Interest on U.S. debt tops $1 trillion for the first time amid higher borrowing costs.
• Trump’s tariffs generate $195 billion in customs revenue, up 153% from 2024.
• Education Department spending plunges 87%, corporate taxes fall 15%.

.8 Trillion as U.S. Interest Payments Top

Trillion for First Time 1">by Emmitt Barry, with reporting from Washington D.C. Bureau Staff

(Worthy News) – The U.S. federal government ended fiscal year 2025 with a $1.8 trillion budget deficit, according to estimates released Wednesday by the Congressional Budget Office (CBO)–a figure only marginally smaller than last year’s record shortfall, even as tariff revenue surged under President Donald Trump’s trade policies.

The report revealed that interest payments on the national debt exceeded $1 trillion for the first time in U.S. history, reflecting the sharp rise in borrowing costs following years of elevated inflation and higher interest rates. Yields on 10-year Treasury notes have climbed from under 2% in 2022 to above 4% in 2025, dramatically increasing the government’s debt-servicing burden.

Revenues rose by $308 billion, or 6%, during the fiscal year that ended September 30, mainly due to Trump’s aggressive tariff campaign, which generated $195 billion in customs duties — up 153% from the $77 billion collected in 2024. Yet spending grew almost in lockstep, increasing by $301 billion, driven by rises in Social Security, Medicare, and Medicaid, all of which rose by about 8% amid higher enrollments and cost-of-living adjustments.

Corporate tax receipts, however, fell by 15%, reflecting changes in Trump’s “One Big Beautiful Bill Act”, which expanded deductions for corporate investments and restructured business tax payments.

Trump’s administration also enacted sweeping cuts to domestic programs. Spending at the Department of Education plunged 87% — a $234 billion reduction — following executive orders that dismantled many DOE functions and restructured the federal student loan system. The Federal Deposit Insurance Corporation (FDIC) also reported a 63% decrease in spending, as bank rescue costs declined from the prior year’s failures.

Despite those cuts, analysts warned that the nation’s fiscal trajectory remains perilous. “While the deficit didn’t rise from last year, it didn’t fall either, and we continue to borrow far too much,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “Our national debt is about the size of the entire U.S. economy and will exceed its highest-ever record as a share of GDP in short order.”

The CBO estimated the 2025 deficit equals roughly 5.9% of GDP, down slightly from 6.4% in 2024. Treasury Secretary Scott Bessent has pledged to reduce that figure to 3% by 2028. However, with interest payments alone surpassing $1 trillion and entitlement spending continuing to rise, many economists warn that achieving such a goal will be challenging without significant policy shifts.

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