---
title: "Rising interest rates lead to soaring deficits, can the U.S. \"hold on\" first?"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/224969938.md"
description: "The U.S. fiscal deficit reached $711 billion in the first quarter of fiscal year 2025, a year-on-year increase of 40%. Government spending hit a record high of $1.8 trillion, primarily due to early welfare payments and post-hurricane reconstruction expenditures. Rising financing costs and declining tax revenues have led to a continued expansion of the deficit, with debt reaching $36 trillion. Economists express concerns about the sustainability of U.S. finances, predicting that the deficit will increase to $1.94 trillion, accounting for 6.5% of GDP. The Trump administration faces challenges in reducing the deficit, but experts are skeptical about this"
datetime: "2025-01-15T00:55:56.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/224969938.md)
  - [en](https://longbridge.com/en/news/224969938.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/224969938.md)
---

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# Rising interest rates lead to soaring deficits, can the U.S. "hold on" first?

The U.S. fiscal deficit continues to rise, increasing the risk of economic pressure.

On January 14 local time, the latest data from the U.S. Department of the Treasury showed that **the federal government budget deficit for the first quarter of fiscal year 2025 (October to December 2024) reached $711 billion, a year-on-year increase of 40%; government spending also reached $1.8 trillion, setting a new historical high.**

Specifically, part of the increase in spending is due to calendar factors that led to earlier welfare payments and temporary expenditures such as hurricane disaster recovery. Among them, the Department of Homeland Security's spending in the first quarter increased by 41% year-on-year, mainly for disaster recovery from the 2024 Atlantic hurricane season.

**In addition to the ongoing increase in spending, rising financing costs and declining tax revenues have jointly led to a spiraling deficit, pushing U.S. debt to the $36 trillion mark.**

Meanwhile, government revenue for the first quarter of fiscal year 2025 was $1.1 trillion, a year-on-year decrease of 2%, and interest expenses reached $308 billion, an increase of $20 billion year-on-year, making it the fourth largest expenditure item after Social Security, defense, and healthcare.

Undoubtedly, **the continuously rising fiscal deficit has raised concerns among economists about the long-term fiscal sustainability of the United States and poses a significant challenge for the incoming Trump administration.**

Federal Reserve Chairman Jerome Powell has stated that the long-term budget deficit outlook for the U.S. is unsustainable. Carl Weinberg, chief economist at High Frequency Economics, believes that the ever-expanding U.S. public sector debt is the most pressing risk facing the current U.S. economy and financial security.

The Congressional Budget Office projects that **the federal government deficit for fiscal year 2025 will increase to $1.94 trillion, accounting for 6.5% of GDP, and the Trump administration's tax cut plan may further increase the deficit**—Wells Fargo chief economist Jay Bryson estimates that the new government's tax cut policies could raise the deficit's share of GDP to 7%-9%.

In response, Trump’s nominated Treasury Secretary Basant has stated a desire to reduce the deficit to 3% of GDP; at the same time, Trump has appointed Musk to lead the "Department of Government Efficiency," aiming to cut $2 trillion in annual government spending within two years.

However, experts are skeptical about this. Jason Furman, a former economic advisor to the Obama administration and an economist at Harvard University, believes that the "Department of Government Efficiency" is unlikely to achieve significant spending cuts before its dissolution in July 2026.

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