US budget deficit shrinks in August, year-to-date flat at $1.97 trillion

The U.S. federal budget deficit for August shrank to $167 billion, aided by lower outlays including refunds on illegally collected tariffs, a decrease in interest payments on federal debt, and calendar shifts in benefit payments, the U.S. Treasury reported on Friday. The fiscal-year-to-date budget gap through August remained flat at $1.97 trillion, exceeding the projected full-year deficit for fiscal 2025 of $1.775 trillion.

For August alone, the budget gap decreased by 52% compared to the previous year. However, when adjusted for calendar shifts where some Medicare and other payments occurred in July, the August deficit was $248 billion, an increase of $7 billion from the prior year. Unadjusted outlays in August fell 24% to $527 billion, while interest payments on the federal debt decreased by $14 billion due to changes in inflation accruals. The fiscal year-to-date data showed an increase of $143 billion, or 13%, in interest payments compared to the same period last year.

Unadjusted receipts for August rose by $16 billion, or 5%, to $360 billion. This included a $12.84 billion inflow of net customs receipts, the first increase since April, following tariff refunds totaling $10.54 billion for the month, which was about one-third of the July refunds.