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CBO reports $1.8 trillion federal deficit as debt costs hit record $1 trillion

The Congressional Budget Office (CBO) reported that the U.S. federal government ran a $1.8 trillion deficit in fiscal year 2025, slightly below last year’s $1.817 trillion shortfall.

🔹 Debt & Interest:
National debt climbed near $38 trillion, and interest payments surpassed $1 trillion for the first time — up 8% ($80 billion) from FY2024, driven by higher debt levels and borrowing costs.

🔹 Spending:
Total federal spending rose $301 billion (4%) year-over-year.

• Social Security: +$121B (8%) due to COLA increases and more retirees.

• Medicare: +$72B (8%) from higher enrollment and service costs.

• Medicaid: +$52B from rising per-enrollee costs.

• Veterans Affairs: +$41B (12%) due to higher care utilization.

• Department of Defense: +$38B (5%) for operations and procurement.

• Agriculture: +$28B (14%) for crop loss relief and farm support.

🔹 Revenue:
Federal tax receipts increased $308 billion (6%).

• Individual income & payroll taxes: +$260B from wage growth.

• Corporate taxes: -15% (-$77B) after the One Big Beautiful Bill Act allowed larger corporate deductions.

• Customs duties/tariffs: +153% (+$118B) due to higher import tariffs under the Trump administration.

➡️ Bottom line: Despite higher revenues, surging spending—especially on entitlements and interest payments—kept the deficit near record highs, underscoring mounting fiscal pressure as U.S. debt heads toward 120% of GDP over the next decade. Read More.

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Stock Bubble Dread Grips Central Bankers in Washington

Global central bankers and finance ministers will meet in Washington this week for the IMF and World Bank fall meetings, with a new and pressing concern on the agenda: the risk of a market crash.

Amid rising trade tensions, record public debt, and AI-fueled stock market exuberance, officials are warning that markets are nearing dot-com–era valuation levels. IMF Managing Director Kristalina Georgieva cautioned that a sharp correction could tighten global financial conditions, slow growth, and hit developing nations hardest.

The Bank of England, European Central Bank, and Reserve Bank of Australia have all issued similar alerts about the potential for sudden, sharp market corrections. Fed Chair Jerome Powell also noted that markets are “highly valued.”

The IMF’s upcoming Global Financial Stability Report and World Economic Outlook, set for release this week, are expected to focus heavily on these risks. Analysts are drawing parallels to the 2000 tech bubble, when the IMF voiced mild concern—just months before markets crashed and the Fed was forced into an emergency rate cut.

Bottom line: Policymakers are increasingly worried that the global economy, already strained by debt and geopolitics, may be on the brink of an AI-driven market bubble bursting. Read More.