Treasury analysis shows drop in government spending
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Treasury Secretary Scott Bessent and Vice President JD Vance with President Trump in the Oval Office last month.` Photo: Andrew Harnik via Getty Images
The Trump administration says government spending is slowing in ways that will help shrink the nation's massive deficit, according to new analysis by Treasury Department officials.
The big picture: The analysis shows that government outlays in the just-completed quarter were negative compared to the prior year.
- On the other side of the ledger: The nation is collecting hundreds of billions of dollars more in revenue from Trump's expansive tariff policies, helping fill the nation's coffers.
- The administration says that mix puts the government on track for a more favorable fiscal outlook — though any economic blowback from Trump's policies could shift those forecasts.
By the numbers: Compared to the same period a year ago, government outlays rose 0.2% in the second quarter, the first complete period of Trump's second term, the analysis shows.
- Government spending then fell 2.5% in the third quarter compared to the prior-year period.
What they're saying: "Ahead of last year's Presidential Election, federal outlays were up nearly 30% from four quarters earlier," Joseph Lavorgna, an economist and counselor to Treasury Secretary Scott Bessent, writes in the analysis.
- Lavorgna says that spending "effectively saddled President Trump with a large deficit for the fiscal year ... there was only so much President Trump could do given half the fiscal year was completed."
Zoom out: The nation's budget deficit was roughly $1.8 trillion for fiscal year 2025, which ended in September — about $41 billion below the prior year.
- It is the first time the annual deficit dipped since 2022, when the expiration of pandemic-era relief programs brought government spending down.
Zoom in: Trump officials say fiscal improvement happened in the second half of the year, when Trump's policies began to take effect.
- "In other words, the underlying trends point to more significant improvement in U.S. finances immediately ahead," Lavorgna says.
- "Going forward, prudent government spending initiatives coupled with surging revenues, the result of booming economic growth and tariffs, will continue to push the budget deficit down," he adds.
Yes, but: The Congressional Budget Office and independent analysts project that the One Big Beautiful Bill Act, Trump's tax cuts and spending bill enacted in July, will mean less federal revenue and thus wider deficits.
Friction point: Monthly tariff hauls are still breaking records, though by a smaller margin compared to earlier months, a sign that the revenue source might be steadying,
- That is a result of Trump-touted moves that, ironically, could put a dent in the tariff revenues the administration says will help improve the nation's fiscal situation.
- That includes trade deals struck with foreign nations and companies pivoting to on-shoring.
What to watch: Trump has teased the possibility of tariff relief for farmers and consumers, both of which would come from the pot of tariff money.
- The end of the government shutdown might also hinge on cuts to health care subsidies in Trump's signature tax bill, which Democrats are seeking to reverse.
