Federal Budget Deficit Grows Amid Increased Tariff Revenue
Victor Davis Hanson, a senior fellow at the Hoover Institution, will address the mounting pressure on the Federal Reserve to lower interest rates during an upcoming segment on “Kudlow” in September.
So far this year, the U.S. federal government has seen its annual budget deficit balloon by $1.9 trillion, even with a significant boost in tariff revenues.
On Friday, the Congressional Budget Office (CBO) provided an update on the budget for July, revealing that the federal deficit reached $1.6 trillion in the first ten months of fiscal 2025.
While federal tax revenue did see an uptick of $263 billion (about 6%), overall tax receipts surged by $3.72 trillion (7%) in the same timeframe, which is quite surprising, outpacing previous profits.
Interestingly, the rise in tax revenue can be largely attributed to tariffs imposed during the Trump administration. These tariffs on imports have seen substantial increases throughout the year on various U.S. trading partners.
Current estimates put the national debt burden at approximately $36.95 trillion as of August 7, 2025.
The CBO noted that tariff collections have climbed by $70 billion, or a striking 112%, compared to last year, thanks to these heightened tariffs.
Personal income and payroll tax receipts have also risen, totaling a $214 billion increase (6%) from the previous year. However, corporate income taxes have dipped by $27 billion (7%) over the same period.
Ray Dario has issued a warning regarding a looming financial crisis if deficit spending isn’t effectively addressed, referring to what he calls an “economic heart attack.”
Federal expenditures have surged by $372 billion in the first ten months of this year, largely driven by mandatory spending programs. Notably, Social Security benefits have increased by $100 billion (8%) compared to last year, primarily due to rising average costs tied to inflation and a growing number of beneficiaries.
Medicare spending has experienced a rise of $58 billion this fiscal year, while Medicaid has gone up by $47 billion due to higher costs per enrollee.
Additionally, the expenses related to servicing the national debt of nearly $37 trillion have also climbed, costing an extra $60 billion (8%) compared to the same period last year.
In July, the federal deficit saw a $45 billion increase when compared to July of the previous year, attributed to expenditures outpacing tax collection growth. The CBO reported a surplus of $27 billion in June 2025, which was $1 billion more than earlier predictions.
