US President-elect Donald Trump
Credit: Reuters Photo
Washington: The US budget deficit jumped nearly four-fold to $257 billion in October, a figure inflated by one-off factors, the Treasury Department said on Wednesday in a report that started off a new fiscal year with a big hole to be turned over to President-elect Donald Trump in January.
The Treasury said the October deficit was up 287 per cent from the $67 billion deficit in October 2023, but calendar adjustments in benefit payments had cut that month's deficit nearly in half.
A US Treasury official also said that in October 2023, the Treasury received about $75 billion in tax payments that had been deferred by wildfires in California and other natural disasters that year.
Without these adjustments, the official said the October 2024 deficit would have been about $47 billion, or 22 per cent higher than the prior October.
The budget results for October, the first month of the 2025 fiscal year, come after President Joe Biden's administration turned in a full-year fiscal 2024 deficit of $1.83 trillion, the largest outside the Covid-19 era.
Trump presided over the biggest-ever US budget deficit of $3.1 trillion in fiscal 2020, the result of massive Covid relief spending coupled with a massive halt to economic activity that collapsed federal revenues.
Trump on Tuesday named billionaire Elon Musk and former presidential candidate Vivek Ramaswamy to head a newly formed non-government body aimed at slashing federal spending and improving bureaucratic efficiency. Musk has said the federal budget could be cut by "at least" $2 trillion, though he did not specify over what time period.
As reported, federal receipts for October were down 19 per cent or $77 billion to $327 billion compared with October 2023, while October outlays were up 24 per cent, or $114 billion to $584 billion.
Outlays for Social Security, Medicare and military spending rose, but one bright spot was a $7 billion or 8 per cent decline in the Treasury's public debt service costs to $82 billion, the first year-on-year decline since August 2023, when interest rate increases began to mount.
Debt interest costs topped $1 trillion for the first time last year, making it the government's largest expense after Social Security.
The Treasury official said that the reduction in October's debt service costs were driven by a $12 billion reduction in payouts for inflation-protected securities due to lower consumer price index inflation.
But net interest on public debt was $80 billion for the month, a $4 billion increase from the prior October, the official said, as it will take time for lower rates to impact overall costs.
However, since Trump's victory, the benchmark 10-year Treasury yield has risen nearly 15 basis points due to market worries about Trump's tax cut plans adding trillions more dollars to federal deficits over a decade.