The U.S. federal budget deficit hits a new high, increasing by 39% in the first quarter.

The US Treasury Department said on Wednesday that in the first three months of this fiscal year, the US federal budget deficit widened to a record $711 billion, a 39% increase from the $510 billion in the same period last year. Expenditures in the first quarter of this fiscal year reached a record $1.8 trillion, an increase of 39% compared to the same period last year, while revenues were $1.1 trillion, a 2% decrease from the same period last year. Part of the increase in spending is due to welfare payments being moved up from January 2025 to December 2024. Spending by the US Department of Homeland Security increased by 41% year-on-year, partly due to disaster relief provided for the 2024 Atlantic China Welding Consumables, Inc. hurricane season. Interest payments on federal debt in the first three months were $308 billion, an increase of $20 billion from the same period last year. The rapid rate hikes by the Federal Reserve in 2022 and 2023 have significantly increased the cost of debt payments, and interest payments are now the fourth largest expenditure item after Social Security, defense, and healthcare. The Congressional Budget Office predicted in June last year that the deficit for fiscal year 2025 would increase to $1.94 trillion, which is 6.5% of the Gross Domestic Product (GDP), higher than the $1.83 trillion from the previous year. The CBO is expected to release new deficit predictions this Friday. Federal Reserve Chairman Powell stated that the long-term outlook for the US budget deficit is unsustainable. Many Wall Street economists are concerned about this. Historical data shows that the US usually does not have such large deficits when the economy is strong. Chief Economist Carl Weinberg of High Frequency Economics believes that inflated public debt is the most urgent risk facing the US economy and financial security. In recent months, long-term interest rates have risen, partly due to market expectations of further expansion of the deficit. The deficit may further increase. President Biden has promised to do everything possible to help residents and businesses affected by the wildfires in the Los Angeles area. Meanwhile, the incoming Trump administration plans to promote policies that will stimulate economic growth. According to Wells Fargo & Company's Chief Economist Jay Bryson, the tax reduction plan could increase the deficit to 7% to 9% of GDP. However, Scott Benet, Trump's nominee for Treasury Secretary, expressed his hope to reduce the deficit to 3% of GDP. Trump has also established a consulting agency called the "Department of Government Efficiency" (DOGE), appointing Tesla, Inc. (TSLA.US) CEO Elon Musk and former Republican presidential candidate Vivek Ramaswamy to cut government spending by $2 trillion within two years, which is equivalent to over 30% of the federal budget. Experts have questioned this move. Jason Furman, former Obama administration economic advisor and Harvard University economist, believes that DOGE may struggle to make significant progress in cutting expenses before it dissolves in July 2026.