What Will Happen To The Deficit In 2025?

The federal spending deficit will almost certainly increase in 2025, forecasters say, as President-elect Donald Trump is widely expected to cut taxes but will have a harder time following through on his campaign promises to significantly cut spending.

The government consistently spends more than it collects in taxes, and the outcome of the November election means that gap—the deficit—will likely increase in 2025, according to expert observers. Since Republicans won control of the White House and Congress, they can implement much of Trump’s economic agenda, including tax cuts that will reduce federal revenue.

Trump promised to cut deficits by lowering spending and raising tariffs on foreign products, but economists said these measures are unlikely to balance out his tax cuts.

In August, economists at the Penn-Wharton budget model estimated that Trump’s major economic policies would push the deficit in 2025 up by $185 billion, and as much as $5.8 trillion over 10 years. Those include extending his 2017 tax cuts and excluding Social Security benefits from federal income taxes.

Trump has proposed further tax cuts, including exempting overtime pay, veterans, and police from paying income tax, further driving up deficits.

Some Economists Are Alarmed at the Size of the Deficit

Deficits are nothing unusual for the government—there’s been one every year since 2001. However, the accelerating size of the $36 trillion in national debt is raising alarm bells among economists, who are increasingly warning that the debt is beginning to pose risks to the financial system. And amid today’s high interest rates, the debt is increasingly burdensome for the government budget: last year, the federal government paid more in interest than it spent on defense.

Some economists say high-deficit policies could benefit household budgets by lowering tax payments, but they also risk stoking inflation and driving up the cost of living. 

To make up for those tax cuts, Trump has pledged to cut spending, going so far as to appoint billionaires Elon Musk and Vivek Ramaswamy to a commission called the Department of Government Efficiency to identify ways to save money, including eliminating regulations.

However, because two-thirds of the federal budget is spent on legally mandated payments such as Social Security and Medicare benefits, as well as interest on the national debt, DOGE has an uphill battle.

“Tax cuts that increase deficits and/or stimulate growth will boost inflation, unless regulatory reform significantly boosts supply and reduces costs, or Elon Musk and Vivek Ramaswamy and their Department of Government Efficiency (DOGE) succeed in significantly cutting government spending,” Robert Fry, an independent forecaster, wrote in a commentary. “I wish them luck, but I’ll believe it when I see it.”