(Mike Maharrey, Money Metals News Service) Good news! The federal budget deficit shrank substantially in November. Bad news! Uncle Sam still ran a significant budget shortfall in November, despite a massive surge in tariff revenue.
The November deficit came in at $173.28 billion. Through the first two months of fiscal 2026 (Oct-Nov), the federal government spent $457.68 billion more than it took in. That was down 26.7 percent compared to the first two months of fiscal ’25.
Looking at it another way, for every dollar the U.S. Treasury received, the Trump administration spent $1.62.
The federal government spent 38.2 percent more than it took in through the first two months of the fiscal year.
Last year, the U.S. government ran the fourth-largest budget deficit on record despite a 142 percent increase in tariff revenue.
Rolling In that Tariff Money
The federal government enjoyed a massive influx of revenue thanks to tariff receipts.
November federal revenue totaled $336 billion, the highest on record for any November. November 2025 receipts were 11 percent higher than in the same month last year.
Through the first two months of the new fiscal year, the Treasury collected $740.37, a 17 percent revenue increase year-on-year.
Customs duties totaled $30.76 billion last month, a 292 percent year-on-year increase. That was down modestly from a record $31.4 billion in October. Tariff receipts came in at $62.11 billion through the first two months of fiscal 2026.
The slight month-on-month drop in tariff receipts may indicate the U.S. has hit peak tariff revenue. With the U.S. inking more trade deals, tariff rates are slowly moderating.
It should be clear that claims that the federal government is going to use tariff revenue to pay a “dividend” to poor and middle-class taxpayers and pay down the national debt are nothing but political rhetoric. Math is the great enemy of this ambitious plan. Even with triple-digit percent increases in tariff revenue, the federal government is still running a huge deficit.
It’s a Spending Problem
The Trump administration blew through $509.28 billion last month. That represents a percent year-on-year increase. That was a significant 23.9 percent decrease compared to November 2024.
But don’t get too excited. Some of November’s payments were shifted back into October due to calendar effects. Total spending through the first two months of fiscal 2025 came in at $1.2 trillion. That was a more modest 4.7 percent decline in spending.
According to the Bipartisan Policy Center, after adjusting for calendar effects, November spending was up 2 percent compared to last year. Spending through the first two months of the fiscal year was down a modest 1 percent after accounting for calendar effects.
Even that slight spending decrease comes with a caveat. Treasury officials say some payments have been delayed due to lingering effects from the government shutdown. Some of that spending will show up in subsequent months.
However, some real spending cuts at the EPA and the Department of Education are showing up in the data. Lower disaster spending also helped moderate spending levels through the first two months of fiscal ’26.
Nevertheless, the spending trajectory is up. Even with all the hype about DOGE and some lip service to cutting spending during the early days of the Trump administration, the U.S. government spent just over $7 trillion last year. That’s an average of $583.3 billion per month or $19.2 billion per day.
Despite some non-specific talk about “spending cuts,” there seems to be little to no commitment to dealing with the runaway spending in a substantial way.
The Big Beautiful Bill trimmed some spending but increased it in other areas. Furthermore, those “cuts” were from projected spending increases. Actual expenditures will still go up, just not as fast as originally planned. The bottom line is that even with the Big Beautiful Bill, spending will increase on an absolute basis.
And all that waste uncovered by DOGE? Virtually none of it was removed from the budget.
This is par for the course.
You might recall that President Biden promised that the [pretend] spending cuts would save “hundreds of billions” with the debt ceiling deal (aka the [misnamed] Fiscal Responsibility Act).
That never happened.
Supporters of the Big Beautiful Bill expect economic growth stimulated by tax cuts to boost revenue and narrow the deficit. However, history casts significant doubt on this claim.
The ugly truth is the government isn’t committed to cutting spending in any meaningful way, and it always finds new reasons to spend even more, whether for “crises” at home or wars overseas.
The Cost of the Debt
On October 21, the national debt surged to over $38 trillion. Less than two months later, the debt stands at $38.4 trillion.
Uncle Sam must pay interest on all that debt. Interest expense has grown into the second-largest spending category in the federal budget behind only Social Security.
In October, the Treasury forked out $96.26 billion on interest expense alone. That pushed interest expense to $200.66 billion through the first two months of fiscal 2026, a 19 percent increase from the same period last year.
Interest on the national debt cost $1.2 trillion in fiscal 2025. That was up 7.3 percent over 2024.
Net interest (interest expense – interest receipts) was $88 billion last month.
Last month, the federal government spent more on interest on the debt than it did on national defense ($65 billion) or Medicare ($25 billion). The only higher spending category is Social Security ($134 billion).
Much of the debt currently on the books was financed at very low rates before the Federal Reserve started its hiking cycle. Every month, some of that super-low-yielding paper matures and must be replaced by bonds yielding much higher rates. And even after the Federal Reserve cut rates, Treasury yields have pushed upward as demand for U.S. debt sags.
Ramifications
People clutch their pearls and bemoan the skyrocketing debt whenever the data comes out, but there seems to be very little real concern. Most people seem to believe that while the debt might be a problem in the abstract, it’s not an immediate crisis. Some people even claim a massive national debt doesn’t matter.
It does.
As the Bipartisan Policy Center points out, the growing national debt and the mounting fiscal irresponsibility make the dollar less and less desirable.
“Confidence in U.S. creditworthiness may be undermined by a rapidly deteriorating fiscal situation, an increasing concern with federal debt set to grow substantially in the coming years.”
This could lead to lower economic growth, higher unemployment, and less investment wealth.
Lack of confidence in the U.S. fiscal situation could also lower demand for U.S. debt. This would force interest rates on U.S. Treasuries even higher to attract investors, exacerbating the interest payment problem.
The bottom line is the U.S. government has a spending problem it won’t address. No matter what the politicians in D.C. claim, there is no way to fix the budget problem by shoveling more money into the hole with tariffs, much less replacing the IRS.
The rest of the world is paying attention.
Biden ran the debt higher at a dizzying pace, but to be fair, this isn’t just a Biden problem. Every president since Calvin Coolidge has left the U.S. with a bigger national debt than when he took office.
It’s going to take more than DOGE rooting out waste to get the borrowing and spending under control. Even if the Trump administration manages to slash discretionary outlays as promised, that only accounts for 27 percent of total spending. The vast majority is for entitlements, and there is little political will to take the scissors to Social Security or Medicare.
And the sad fact is that, given the political incentives, people in power will always kick the debt can down the road. It is a long-term problem that will require painful measures to fix. Politicians don’t want to create pain. That’s a quick path out of office. So, they will punt the debt problem and spend more to make constituents happy.
As I say every month, this is all well and good, but the problem with playing kick the can down the road is that you eventually run out of road.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
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