The US government posted a $US145 billion ($A217 billion) budget deficit in December, marking a sharp deterioration in the monthly fiscal position and highlighting the impact of higher spending, calendar shifts in benefit payments and signs that tariff-related revenue growth may be levelling off.
The Treasury Department, releasing its monthly budget statement on Tuesday (local time), said the December deficit was 67 per cent higher than a year earlier, an increase of $US58 billion ($A87 billion) compared with December 2024. Officials said the figure was inflated by record outlays and timing shifts in both payments and receipts.
Despite the headline number, Treasury stressed that calendar effects played an outsized role. After adjusting for payment timing differences between December 2024 and December 2025, the deficit would have been $US112 billion ($A168 billion), which would represent a $US14 billion ($A21 billion), or 11 per cent, improvement from the year-earlier period.
Still, the reported $US145 billion shortfall was the largest December deficit on record, according to a senior Treasury official.
A key factor was the shifting of benefit payments. Around $US32 billion ($A48 billion) in January 2026 benefit payments were pulled forward into December because the new year began on a weekend. By contrast, $US51 billion ($A76 billion) in December 2024 benefit payments had been pushed into other months, exaggerating the year-on-year comparison.
The report also suggested that revenue growth from President Donald Trump’s tariffs may be losing momentum. Net customs receipts in December totalled $US27.9 billion ($A41.8 billion), down from the low $US30 billion ($A45 billion) range recorded in recent months, though still far above the $US6.8 billion ($A10.2 billion) collected in December 2024.
For the first three months of fiscal 2026, which began on October 1, net customs receipts reached $US90 billion ($A135 billion), a dramatic increase from $US20.8 billion ($A31.1 billion) in the same period a year earlier.
However, the outlook for tariff revenue remains uncertain. The Trump administration implemented tariff-cutting trade deals in November, including 10 percentage-point reductions on imports from China and South Korea, moves that are expected to weigh on future collections. In addition, the Supreme Court is expected to rule soon on legal challenges to Trump’s use of emergency sanctions law to impose tariffs. A ruling against the administration could further reduce customs receipts.
On the spending side, military outlays jumped sharply in December, reaching $US98 billion ($A147 billion). That was $US20 billion ($A30 billion), or 25 per cent, higher than a year earlier. Treasury said the increase was partly due to the resumption of defence payments delayed by a government shutdown in October.
Broader fiscal trends were more mixed. The deficit for the first three months of fiscal 2026 totalled $US602 billion ($A901 billion), which was $US109 billion ($A163 billion), or 15 per cent, lower than the same period a year earlier. Treasury attributed the improvement to record receipts, even as outlays also reached unprecedented levels.
Fiscal year-to-date receipts rose to $US1.225 trillion ($A1.834 trillion), up $US142 billion ($A213 billion), or 13 per cent, from a year earlier — a record for the period. Treasury said collections were boosted in part by tax payments delayed last year due to California wildfires.
At the same time, outlays for the first three months of fiscal 2026 climbed to a record $US1.827 trillion ($A2.735 trillion), up $US33 billion ($A49 billion), or 2.0 per cent, from the year-earlier period. Spending growth was driven by increases in Social Security and healthcare programs, as well as higher interest costs on the national debt.
Net interest payments rose $US46 billion ($A69 billion), or 15 per cent, from a year earlier to $US355 billion ($A531 billion). A Treasury official said the increase was largely due to the expanding debt load, noting that the weighted average interest rate on Treasury debt in December was 3.32 per cent, only slightly above the 3.28 per cent recorded a year earlier.
The figures underscore the ongoing tension between robust revenue growth and persistent spending pressures, with debt servicing costs continuing to climb as the federal balance sheet expands.
