Biden Kicks of Fiscal 2025 With Biggest Deficit Ever

By Mike Maharrey 

Through the first two months of fiscal 2025, the Biden administration managed to run a $624.21 billion budget. It’s the biggest shortfall to start a year on record. 

The November deficit came in at $366.76 billion, according to the Monthly Treasury Report. That was 16.8 percent higher than the November 2023 shortfall and the biggest November deficit on record. 

This follows on the heels of the biggest October deficit ever recorded.

The Biden administration managed to spend its way to this massive November deficit despite $301.75 billion in tax receipts, a 9.8 percent revenue increase over November last year.

This undercuts those who continue to insist tax cuts under the Trump administration are the problem. The real issue is on the spending side of the ledger. 

The Biden administration blew through $668.52 billion in November. Through the first two months of fiscal 2025, the federal government spent $1.25 trillion.

Spending in November was up 13.5 percent over last year.

You might recall that President Biden promised that the [pretend] spending cuts would save “hundreds of billions” with the debt ceiling deal (aka the [misnamed] Fiscal Responsibility Act). 

That never happened.

The federal government continues to find new reasons to spend money, whether for natural disasters at home or wars overseas. The Biden administration spent a staggering $6.75 trillion in fiscal 2024, a 10 percent increase over 2023 outlays.

The federal government shelled out $86.59 billion on interest expense in November, bringing total interest expense to $168.59 billion for the year. November interest expense was more than what Uncle Sam spent on national defense ($76 billion). These numbers are generally in line with the first two months of fiscal 2024, but we’ll likely see a big jump in December with more payments coming due.

Uncle Sam paid $1.13 trillion in interest expense in fiscal 2023. It was the first time interest expense has ever eclipsed $1 trillion. Projections are for interest expense to remain at a similar level in fiscal 2024.

Even with the recent Federal Reserve rate cuts, Treasury yields are pushing upward as demand for U.S. debt sags. Since Trump’s electoral victory, the yield on the 10-year Treasury is up 15 basis points. 

Much of the debt currently on the books was financed at very low rates before the Federal Reserve started its hiking cycle. Every month, some of that super-low-yielding paper matures and has to be replaced by bonds yielding much higher rates.

Who Cares?

These big deficits pile onto an unfathomable national debt that officially topped $36 trillion last month.

According to the national debt clock, that represents 123.39 percent of GDP. Studies have shown a debt-to-GDP ratio of over 90 percent retards economic growth by about 30 percent. 

We see these big deficits month after month, but most people don’t bat an eye. There seems to be a sense that spending more than you take in month after month isn’t a problem.

But anybody who says “deficits don’t matter” is deluded. 

As the Bipartisan Policy Center points out, the growing national debt and the mounting fiscal irresponsibility undermine the dollar. 

“Confidence in U.S. creditworthiness may be undermined by a rapidly deteriorating fiscal situation, an increasing concern with federal debt set to grow substantially in the coming years.”

This could lead to lower economic growth, higher unemployment, and less investment wealth.

Lack of confidence in the U.S. fiscal situation could also lower demand for U.S. debt. This would force interest rates on U.S. Treasuries even higher to attract investors, exacerbating the interest payment problem. 

Biden has run the debt higher at a dizzying pace, but to be fair, this isn’t just a Biden problem. Every president since Calvin Coolidge has left the U.S. with a bigger national debt than when he took office.  

The debt will likely be one of the biggest problems facing President Trump as he takes the reins of power. With Republicans controlling both chambers of Congress and the White House, there is an opportunity to tackle the spending problem, but whether the GOP has the political will to make substantial cuts remains to be seen. 

Trump has at least talked about slashing the size of government, but he’s going to need to do better than he did during his first term.

The Trump administration almost hit the $1 trillion mark in 2019 and was on pace to run a trillion-dollar deficit in fiscal 2020 before the pandemic, even as the U.S. supposedly enjoyed the “best economy” ever. The economic catastrophe caused by the government’s response to COVID-19 gave policymakers an excuse to spend with no questions asked, and we saw record deficits in fiscal 2020 and 2021.

Even if the Trump administration manages to slash discretionary spending as promised, that only accounts for 27 percent of total spending. The vast majority is for entitlements, and there is little political will to take the scissors to Social Security or Medicare.

And the sad fact is most people in positions of power are content to kick the debt-can down the road. They reason, ‘Nothing has happened yet, so why worry?’ But the problem with playing kick the can down the road is you eventually run out of road. 

Originally Published on Money Metals Exchange.