Kobeissi Letter Highlights Worsening US Fiscal Crisis with $316B May Deficit

As of 25 June, the US fiscal crisis is at hand with the Treasury reporting a mind-blowing budget hit of $316 billion in May 2025. This represents the third biggest monthly deficit since the onset of records. The deficit indicates the increased government spending and the restricted inflow of revenues. Moreover, the total outlays amount has grown by 3% annually over the same period to the current amount of $687 billion.

Significantly, the tariff revenues soared by 270% to a peak of $23 billion, but this hardly touched the growing deficit. This is because the first eight months of Fiscal Year 2025 have already brought a $1.37 trillion deficit. The cumulative federal deficit as of the end of 2006 currently stands at $2.0 trillion, or 6.7% of GDP, as opposed to 6.1% of GDP a year ago.

This grim fiscal scenario presents a vivid reflection of the declining problem of deficit spending. Though incremental revenues are helping reduce the gap, interest payments and entitlements are rising and undoing any significant shakeouts in savings. Following the government’s tinkering towards the possible fiscal cliff, there are imminent legislative decisions to take.

Trump’s “Big Beautiful Bill” Fuels Fiscal Firestorm

Recently, the US President, Donald Trump, has come back to the policy spotlight. He has urged the Senate Republicans to advance his hallmark spending and tax-cut package, which he termed the One Big Beautiful Bill Act. This infrastructure bill includes provisions to extend some expiring legislation in the 2017 Trump tax cuts. It also includes an increase in military and border security spending, and an increase in the federal debt limit by another $5 trillion.

It has an estimated cost of at least $2.8 trillion based on the evaluation by the Congressional Budget Office. This is a nonpartisan group, although other independent analysts have predicted even higher effects as a result of the Senate bill version. Nevertheless, Trump has told his party to fast-track and has lectured the lawmakers, saying, “LOCK YOURSELVES IN A ROOM, IF YOU HAVE TO, and DON CAME HOME but GET THE DEAL DONE THIS WEEK.”

Treasury Secretary Scott Bessent followed up the urgency signaling assurance that the legislation will pass Congress by 4 July. The nation, he warned, is approaching the yellow line and is in danger of defaulting. This comes since the federal government is fast approaching its budget-busting “X date” later this summer.

Senate Divisions and Political Consequences

Although both Senate houses are handled by the Republican majority, the lawmakers in the Senate have stopped short of the contents of the bill. After the spending practices, hard-right conservatives are urgently insisting on severe spending reductions. This is in order to counter the tax cut, with moderate ones feeling the pinch of the reductions on major social programs like funding of rural hospitals.

Senators such as Maine Senator Susan Collins and North Carolina Senator Thom Tillis are scheduled to face re-election in 2026. They have expressed reservations on the potential impact of the proposed cuts on the delivery of healthcare services in their respective states. Rural healthcare has become one of the key points in the negotiation process. Others propose that a $100 billion rural hospital fund be added to cushion the blow. However, critics point out that even this amount might be insufficient to continue operations.

In the meantime, the senate democrats’ leader, Chuck Schumer, has criticized the plan as a debt buster. He claims that this will increase spending, coupled with some fiscally irresponsible tax cuts. According to him, the strategy of the GOP poses a danger as it would expose the nation to further debt, amounting to favoring the rich individuals and companies.