Americans saw their cost of living spike while the Biden administration indulged in profligate spending and ran up massive budget deficits, but that’s finally starting to change. The latest data from the U.S. Treasury show that President Trump and Treasury Secretary Bessent are reining in the runaway federal budget, bringing relief to federal and family finances.
When President Trump started his second term, he inherited the worst-ever start to a fiscal year, which began October 1, 2024, including a cumulative deficit of $840 billion in just four months. For perspective, that’s even worse than the same period during Covid when Congress was spending money like drunken sailors.
Yet, the fiscal year ended last month with its best September ever, having a surplus of $198 billion. Furthermore, the deficit for the entire 2025 fiscal year was lower than 2024 and about $102 billion lower than originally forecasted. Why the improvement? It was the Trump administration’s diligent work slashing spending and boosting revenue.
The Department of Government Efficiency has cut wasteful and redundant contracts, fraudulent grants and improper payments, and all manner of left-wing boondoggles that weren’t mission-aligned with individual agencies. Their efforts have saved over $1,300 per taxpayer.
Likewise, Russ Vought, the Director of the Office of Management and Budget, has been spearheading various cost-saving measures, including reductions of bureaucratic waste, unnecessary headcount, and unproductive foreign aid.
The Trump administration’s whole-of-government approach to cutting has paid serious dividends, as evidenced by the Treasury Department’s last monthly statement. In the second and third quarters of this year, when there was no overlap with the Biden administration, the federal deficit shrunk almost 40 percent compared to the same period during Biden’s last year in office.
Government spending essentially stopped growing in the second quarter, coming in at just 0.2 percent higher than the same three months in 2024. Then, in the third quarter, spending declined by 2.5 percent year-over-year. Lower spending meant the government could borrow less.
The cumulative deficit of just $468 billion for the six months from April through September was also the smallest deficit for those six months since 2019, during the first Trump administration. Bond markets rewarded these positive developments by pushing down yields on many Treasury securities to new lows for 2025—a sign of confidence in the government.
Unsurprisingly, the prior two quarters of the fiscal year that overlapped with the Biden administration accounted for about three-quarters of the fiscal year’s total budget deficit. Without the previous administration’s profligate spending and general mismanagement, the deficit would’ve likely been the smallest since 2018.
The rollback of federal spending is evident in other data as well, beyond the Treasury’s monthly statements. According to the Bureau of Economic Analysis, the portion of gross domestic product that’s made up of government purchases actually fell in both the first and second quarters of this year.
That represents a transfer of resources away from the unproductive public sector and towards the productive private sector, but it also means that the Trump administration has been successful in reducing spending. That reduction should accelerate as Mr. Vought works with the rest of the administration to accelerate budget cuts during the Democrat-imposed government shutdown.
The smaller deficit is not only due to lower spending, however—government receipts are way up. They were $317 billion higher in fiscal year 2025 than fiscal year 2024. That increase is partly from a growing economy generating more tax revenue, but it’s also from President Trump’s tariffs, which have push customs duties up from $77 billion to $195 billion.
For context, that’s more than triple the $63 billion previously forecasted for fiscal year 2025—and the tariffs were only in place the last few months. There can be no doubt that less spending and more revenue is reducing the budget deficit and moving federal finance in the right direction.
This is important because when government spends, borrows, and creates less money, there’s less inflationary pressure in the economy, which brings relief to families. Secretary Bessent has talked repeatedly about the need to grow the economy and incomes faster than the federal deficit to return America to fiscal sanity. Thus far, he and the rest of the Trump administration are doing exactly that.
E.J. Antoni, Ph.D., is chief economist and the Richard Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.