The US budget deficit in October increased 287% compared to the same month last year, from $67 billion to $257 billion, according to a report from the US Treasury Department. However, several adjustments have significantly reduced the deficit from last October, making the current figure appear to be much larger. Specifically, the 2023 deficit, affected by delayed benefit payments and deferred taxes due to the California wildfires and other natural disasters, is estimated at $75 billion.

Without taking these adjustments into account, the Ministry of Finance said, the budget deficit in October 2024 would be only about $47 billion, an increase of 22% compared to the same period last year.

Federal revenues fell 19%, or $77 billion, to $327 billion in October compared to October 2023. Spending, meanwhile, rose 24%, or $114 billion, to $584 billion. Spending on Social Security, Medicare, and defense all increased.

The only bright spot in the picture was that Treasury debt servicing costs fell 8%, or $7 billion, to $82 billion – the first year-on-year decline since August 2023. The main reason was a reduction in the cost of paying for inflation-protected bonds as the consumer price index cooled.

Pressure on the Trump Administration

The October deficit kicks off fiscal year 2025, after the Biden administration ended fiscal year 2024 with a record $1.83 trillion deficit. That would be the largest deficit outside of COVID-19. President Trump previously recorded a record $3.1 trillion deficit in fiscal year 2020 due to massive COVID-19 relief packages and a sharp decline in federal revenue.

The sharp increase in the deficit continues to strain the budget and poses a major challenge for the new Trump administration. To address it, he has appointed billionaire Elon Musk and former presidential candidate Vivek Ramaswamy to lead a non-governmental organization with the goal of cutting spending and improving management efficiency. Musk said the federal budget could be cut by “at least” $2 trillion, although he has not specified a specific time frame.

While public debt servicing costs have eased in the short term, interest costs have risen slightly to $80 billion this month, up $4 billion from a year earlier, with the Treasury saying it will take time for lower interest rates to have a positive impact on overall costs.

The yield on the 10-year US Treasury note jumped nearly 15 basis points immediately after Trump’s victory, as markets worried that Trump’s tax cut plans could add trillions of dollars to the federal budget deficit over the next decade.