WorthyNews:U.S. Deficit Shrinks in May, But Fiscal Year Shortfall Still Deepens Amid Tax and Spending Debate

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by Worthy News Washington D.C. Bureau Staff

(Worthy News) – The U.S. government recorded a $316 billion budget deficit in May, the Treasury Department reported, marking a 9% year-over-year decline as rising revenues and calendar adjustments pointed to potential fiscal improvement. When accounting for timing shifts in benefit payments, the adjusted deficit narrowed to $219 billion, a 17% drop compared to May 2024.

Federal tax receipts surged 15% year over year to $371.2 billion, while outlays climbed to $687.2 billion—an increase of roughly 3%. Still, the broader fiscal picture remains grim: the total budget gap for fiscal year 2025 now stands at $1.365 trillion, 14% higher than at the same point last year.

Customs duties have provided a rare bright spot. Revenues from President Donald Trump’s tariff policies exceeded $22 billion in May alone, with year-to-date customs receipts soaring 60% to $81 billion. According to the Treasury’s June 9 Daily Statement, the government took in nearly $2 billion in customs and excise taxes during just the first nine days of June.

Among the largest May spending items were Medicare ($149 billion), Social Security ($132 billion), and health programs ($80 billion). Net interest payments on the national debt reached $86 billion last month—making it the third-largest monthly expense—and have totaled $665 billion so far this fiscal year. Treasury projections estimate gross interest on federal debt will top $1.2 trillion by the end of the fiscal year.

The data comes as Washington remains mired in debate over Trump’s proposed One Big Beautiful Bill Act, a sweeping tax-and-spending measure that would extend the 2017 tax cuts. Republican lawmakers remain divided over its impact on deficits. While the Congressional Budget Office (CBO) projects it would cut federal outlays by $1.25 trillion from 2025 to 2034, it also estimates a $3.7 trillion revenue loss over the same period—adding significantly to future deficits.

In contrast, a separate June 4 CBO report projects that tariff income could reduce primary deficits by $2.5 trillion over the next decade. Senator Jim Justice (R-W.Va.) dismissed long-term projections in favor of a line-by-line approach. “I want to see us be able to get rid of every single bit of waste,” Justice told The Epoch Times. “And then I want to see us grow our way out of the mess.”

Trump and GOP allies argue the bill is necessary to prevent tax hikes on middle-income Americans. Citing a Tax Foundation study, they warn that if the law is allowed to expire, 62% of filers could see higher taxes by 2026. Democrats counter that the plan disproportionately favors the wealthy, though the Joint Committee on Taxation’s May 13 analysis shows average tax rates would fall for most taxpayers.

Treasury Secretary Scott Bessent told the House Ways and Means Committee on June 11 that the current deficit is projected to be between 6.5% and 6.7% of GDP. “Everyone on the Democratic side voted for the biggest blowout for the deficit in history, and we are suffering from that this tax year,” Bessent said.

Despite deficit concerns, demand for U.S. government debt remains strong. At the $39 billion 10-year note auction on June 11, investors accepted a 4.421% yield—slightly below pre-auction levels. U.S. investors purchased nearly 20% of the issuance, outpacing the 12-month average of 14.5%, while foreign bidders took 71%, just under their average share.

The White House has pointed to robust debt demand and stable Treasury yields as signs that fiscal health is improving, even as the political battle over taxes and spending intensifies heading into the next election year.

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