How much will the government increase spending in 2025?
Short Answer
Both the model and the market expect the government to increase spending by at least $500 billion in 2025, with no compelling evidence of mispricing.
1. Executive Verdict
- FY2025 federal outlays reached $7.01 trillion, a 4% increase from FY2024.
- CBO's initial spending projections frequently differ significantly from final outlays.
- Mandatory spending categories are highly susceptible to post-publication revisions.
- FY2025 federal interest payments already exceeded CBO's initial projections.
- The One Big Beautiful Bill Act may have a greater impact on spending.
- Final FY2025 U.S. fiscal data will be officially published by October 10.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| At least $500 billion | 31% | 2% | Ongoing inflation and existing entitlement programs will naturally increase spending by at least $500 billion. |
| At least $1 trillion | 7% | 0.5% | Significant new policy initiatives or a major economic downturn could drive a trillion-dollar increase. |
Current Context
Government spending in Fiscal Year 2025 significantly exceeded historical averages. Federal spending in Fiscal Year 2025 (FY2025), which concluded on September 30, 2025, totaled $7.01 trillion, representing 23.1% of GDP, surpassing the 50-year average of 21.2% [^], [^]. This resulted in a federal deficit of approximately $1.8 trillion for FY2025, with other estimates placing it at $1.775 trillion [^], [^], [^], [^]. A significant legislative development impacting these figures was the enactment of the "One Big Beautiful Bill Act" (OBBBA) in July 2025, which made permanent certain tax cuts, introduced new ones, and increased spending for defense and immigration [^], [^]. The OBBBA is projected to increase deficits by $4.7 trillion over 10 years, though new higher tariffs partially offset this by raising federal revenue by $3 trillion [^]. Immigration spending, specifically, saw approximately $150 billion retained by the Department of Homeland Security (DHS) from the OBBBA, with most substantial spending for these funds expected in late 2025 and beyond [^]. These figures were largely confirmed by the Congressional Budget Office's (CBO) Budget and Economic Outlook: 2026 to 2036, released on February 11, 2026, which provides updated projections and a look back at FY2025 [^], [^].
Mandatory spending and debt interest are major drivers of the growing deficit. Key data indicates that debt held by the public reached 100% of GDP in FY2025, equivalent to $112,700 per person, and is projected to increase further [^], [^]. Mandatory spending categories, including Social Security ($1.6 trillion or 5.2% of GDP) and Medicare ($1.2 trillion or 3.9% of GDP), alongside net interest costs on the national debt ($965 billion in FY2025), are identified as dominant and growing factors [^], [^], [^]. Total federal revenues in FY2025 were $5.2 trillion, with customs duties (tariffs) accounting for 3.7% of this revenue [^], [^]. Economically, real GDP growth in 2025 was around 1.9%, supported by strong household spending, with expectations for 2.0% to 2.2% growth (Q4 to Q4) [^], [^], [^], [^]. Inflation, as measured by the PCE price index, was 2.8% in 2025, higher than previous projections, with overall inflation at 2.7% in December 2025 [^]. Experts from the CBO warn of "ballooning deficits" driven by "rising interest costs and unchecked entitlement spending," projecting federal debt to surpass the WWII record by 2030 [^], [^], [^], [^], [^], [^]. Dominik Lett of the Cato Institute highlights that "Autopilot mandatory spending" is largely responsible for this growth [^]. Jonathan Burks of the Bipartisan Policy Center notes that "large deficits are unprecedented for a growing, peacetime economy," and projects net interest payments to surpass $1 trillion in FY2026 and double to $2.1 trillion by FY2036, becoming the fastest-growing spending category [^].
Future fiscal sustainability and political gridlock remain significant concerns. The CBO projects the 2026 deficit to be about $100 billion higher than its January 2025 projections, with cumulative deficits from 2026 to 2035 increasing by $1.4 trillion due to legislative changes like the OBBBA [^], [^]. Michael Peterson of the Peterson Foundation characterizes the CBO's projections as "an urgent warning about America's costly fiscal path" [^]. Upcoming events include regular CBO updates, such as the February 11, 2026 Budget and Economic Outlook, and Bureau of Economic Analysis (BEA) data releases, with Personal Income and Outlays data for December 2025 scheduled for February 20, 2026 [^], [^]. The FY2026 budget process is ongoing, with the Trump administration expected to submit its budget request, and potential government shutdowns or sequestration if Congress fails to pass appropriations [^], [^], [^]. A critical point of negotiation will be the expiration of most individual tax income provisions of the 2017 tax cuts at the end of 2025, which could add trillions to the national debt if extended [^], [^]. Common concerns revolve around the unsustainability of federal debt, the impact of entitlement spending and interest costs crowding out other essential spending, and potential inflationary pressures from higher tariffs [^], [^], [^]. Debates also persist on economic growth outlook, political gridlock, and the effectiveness of proposed spending cuts in addressing the "unsustainable fiscal outlook" [^], [^], [^], [^], [^], [^].
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
This prediction market has exhibited a clear upward trend, with the probability of a government spending increase of at least $500 billion rising from a starting point of 22.0% to its current price of 32.0%. The market has traded within a range of 20.0% to 36.0%, characterized by significant volatility in early 2026. This period saw four major price shifts driven by specific fiscal news. A 13.0 percentage point spike on January 15 was a direct reaction to a Treasury report showing higher-than-expected federal outlays. This was followed by a volatile two-day period, with a 10.0 point spike on January 27 attributed to news of retroactive tax legislation, immediately followed by a 10.0 point drop on January 28 as traders priced in the spending-reducing effects of an impending government shutdown. Most recently, an 11.0 point spike on February 13 was caused by the market digesting a CBO report that projected significantly higher spending and deficits, pushing the price to its current level.
The market has established clear technical levels, with a notable resistance point around the 35.0% to 36.0% mark, which was tested and rejected on two separate occasions in late January. Conversely, a support level appears to have formed in the low 20% range, representing the baseline probability before the recent influx of fiscal data. The total traded volume of over 22,000 contracts suggests consistent market interest and engagement. Overall, the price action indicates that market sentiment has become more favorable toward a significant spending increase, but it remains cautious, assigning less than a one-in-three probability to the outcome. The sharp reactions to official data releases from the Treasury and CBO, as well as to political events like shutdowns, demonstrate a market that is highly sensitive to new information regarding the government's fiscal state.
3. Significant Price Movements
Notable price changes detected in the chart, along with research into what caused each movement.
📈 February 13, 2026: 11.0pp spike
Price increased from 21.0% to 32.0%
Outcome: At least $500 billion
What happened: The primary driver of the 11.0 percentage point spike in the prediction market on February 13, 2026, was the widespread reporting and analysis of the Congressional Budget Office's (CBO) "Budget and Economic Outlook: 2026 to 2036," initially released on February 11, 2026 [^]. This report significantly updated projections for federal spending and deficits, with the CBO estimating that the "One Big Beautiful Bill Act" (OBBBA) enacted in 2025 would increase deficits by an estimated $4.7 trillion over the 2026-2035 period [^]. This new information, indicating substantially higher projected government spending, including for 2025, directly influenced market expectations [^]. Traditional news outlets, such as Forbes and the Associated Press, published articles on February 13 detailing the CBO's revised deficit forecasts and the role of recent legislation in driving increased spending [^]. This breaking news coincided with the price movement and served as a clear mechanism for disseminating the updated fiscal outlook to market participants [^]. No significant social media activity from influential figures directly causing or coinciding with this specific price spike was identified, suggesting traditional news and official announcements were the dominant factor [^]. Social media was (c) mostly noise, with no specific post found to directly explain the precise timing and magnitude of the 11.0 percentage point jump in the "At least $500 billion" outcome for 2025 government spending [^]. The CBO report and subsequent news coverage were the primary drivers [^].
📉 January 28, 2026: 10.0pp drop
Price decreased from 35.0% to 25.0%
Outcome: At least $500 billion
What happened: The primary driver of the 10.0 percentage point drop in the prediction market price for "At least $500 billion" government spending increase in 2025 on January 28, 2026, was the impending and then actual partial United States government shutdown [^]. Reports on that date indicated that the federal government was days away from a partial shutdown, as funding for several agencies was set to expire on January 30, 2026 [^]. This news, signaling fiscal constraint and uncertainty, directly coincided with and is identified as the cause of the market's expectation of lower spending increases [^]. There is no indication that social media activity from key figures was the primary driver; rather, it was a traditional news event [^].
📈 January 27, 2026: 10.0pp spike
Price increased from 25.0% to 35.0%
Outcome: At least $500 billion
What happened: The primary driver of the 10.0 percentage point spike in the "How much will the government increase spending in 2025?" prediction market on January 27, 2026, was likely the traditional news of the "One Big Beautiful Bill" retroactively impacting 2025 taxes [^]. An Investopedia article published on the same day reported that this bill introduced new tax breaks and deductions, expected to increase average taxpayer refunds by 15% to 20% for 2025, which would equate to a substantial government fiscal outlay or reduction in revenue interpretable as increased spending [^]. This news coincided with the price movement, directly addressing government action related to 2025 finances [^]. Social media activity was largely irrelevant, as no significant posts from key figures or viral narratives concerning this specific market movement were found around the given date [^].
📈 January 15, 2026: 13.0pp spike
Price increased from 22.0% to 35.0%
Outcome: At least $500 billion
What happened: The 13.0 percentage point spike in the prediction market on January 15, 2026, was primarily driven by the release of official government financial data indicating significant increases in federal outlays [^]. On that day, the Department of the Treasury's Monthly Treasury Statement for December 2025 and the Congressional Budget Office's (CBO) Monthly Budget Review were released, highlighting "concerning trends in its spending" [^]. These reports revealed a Q1 FY 2026 deficit of $602 billion, exceeding the federal government's total deficit for FY 2016, with government spending totaling $1.8 trillion in the same quarter [^]. This news coincided with the price movement and was explicitly identified as the likely primary driver [^]. While historical social media discussions from key figures like Elon Musk and Donald Trump regarding government spending and budget cuts occurred in 2024 and 2025, there is no evidence of specific, influential social media activity immediately preceding or during January 15, 2026, that directly caused this particular spike [^]. Therefore, social media was largely irrelevant as a primary driver for this specific price movement [^].
4. Market Data
Contract Snapshot
Based on the provided page content: "How much will the government increase spending in 2025? Odds & Predictions", there is insufficient information to determine the exact triggers for YES or NO resolution, key dates/deadlines, or any special settlement conditions. The provided text only states the market's question.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Implied probability |
|---|---|---|---|
| At least $500 billion | $0.31 | $0.70 | 31% |
| At least $1 trillion | $0.07 | $0.96 | 7% |
Market Discussion
Discussions surrounding government spending in 2025 primarily highlight a significant increase in federal outlays, driven largely by mandatory programs and interest on the national debt [^]. Federal spending for fiscal year 2025 rose by 4% to $7.0 trillion, with Social Security, Medicare, and Medicaid alone increasing by $249 billion (8%) [^]. Many experts and commentators expressed concern over the "unsustainable path" of the federal budget due to surging debt and rising deficits, noting that mandatory spending and interest costs outpace revenue growth [^]. Additionally, social media and news commentary debated the perceived failure of political promises to cut spending, attributing much of the increase to the "autopilot" nature of entitlements and the impact of the "One Big Beautiful Bill Act" on tax provisions [^].
5. Why Do CBO Spending Estimates Often Deviate from Treasury Outlays?
| First-Year CBO Overstatement (New Programs) | Often 10-20% or more [^] |
|---|---|
| ACA Subsidy Outlay Deviation (FY2014) | CBO overstated by approximately -43% [^] |
| IRA Clean Energy Tax Credit Cost | Outside projections 2x-3x CBO's initial score [^] |
CBO's initial first-year outlay projections often diverge significantly from final spending [^] . Historically, the Congressional Budget Office (CBO) has frequently overestimated first-year outlays for new, complex programs by 10-20% or more due to factors such as implementation friction, administrative delays, and slower public uptake [^]. For instance, first-year subsidy outlays for the Affordable Care Act were overstated by approximately -43% for FY2014 [^].
Underestimation risks exist for uncapped programs due to CBO's predictive models. However, the CBO faces a risk of underestimation for uncapped, demand-driven programs like the Inflation Reduction Act's (IRA) clean energy tax credits, with some outside analyses projecting costs 2x-3x the CBO's initial 10-year score [^]. These deviations stem from fundamental methodological differences; the CBO uses predictive modeling based on static economic and behavioral assumptions, which are subject to inherent uncertainty including economic fluctuations, varied behavioral responses to incentives, and assumptions about administrative capacity [^], [^]. In contrast, the U.S. Department of the Treasury provides a retrospective, cash-basis record of actual disbursements, which may not align temporally with CBO's budget authority commitments and does not inherently attribute spending to specific legislative impacts [^]. This "timing" versus "total" error often means that outlays predicted for Year 1 may simply shift to later years [^].
Future spending forecasts indicate continued potential for significant divergence from actuals. For 2025 spending forecasts, these insights suggest a strong potential for continued divergence between CBO projections and Treasury actuals. Administrative bottlenecks in implementing recent legislation like the IRA could lead to CBO overestimation, while the uncapped nature of certain tax credits presents a significant risk of CBO underestimation if behavioral uptake exceeds predictions [^]. Shifting macroeconomic conditions, such as higher inflation, a recession, or elevated interest rates, could also dramatically alter actual outlays for mandatory programs and debt servicing, further increasing the gap [^], [^].
6. What Drives the Lag Between Federal Obligations and Outlays?
| Obligation vs. Outlay Definition | Obligation is a legal commitment, outlay is actual cash disbursement (OMB Circular A-11 [^], GAO Red Book [^], TFM [^]) |
|---|---|
| Typical First-Year Spendout Rate for Capital | 5-20% for major investment accounts (CBO [^]) |
| FY2026+ Outlays from $150B Q4 FY2025 Obligation | $120 billion to $142.5 billion (80% to 95%) (Based on spendout rates [^]) |
Federal accounting distinguishes between obligations and outlays, causing spending delays. Federal accounting rules create a critical temporal lag in recorded government spending by differentiating between an obligation and an outlay. An obligation represents a legal commitment to pay, recorded when a binding agreement, such as a contract, is established [^]. In contrast, an outlay is the actual disbursement of cash from the Treasury to liquidate that obligation, recorded only when the payment is physically made [^]. This fundamental difference means that funds legally committed in one fiscal year often do not register as outlays until subsequent years.
Large, late-year obligations often shift most outlays to future fiscal years. For substantial, multi-year federal funds obligated late in a fiscal year, the majority of actual outlays typically shift into future fiscal years. Data on 'spendout rates' from the Congressional Budget Office (CBO) indicates that major investment accounts, such as procurement or construction, frequently exhibit low first-year spendout rates, often ranging from 5% to 20% [^]. This pattern suggests that for a significant obligation, like a hypothetical $150 billion Department of Homeland Security fund for capital investments obligated in the final quarter of FY2025, it is highly plausible that 80% to 95% of the associated payments would occur in FY2026 and beyond.
7. What Factors Drive Revisions in FY2024 Mandatory Spending Baseline Projections?
| FY2024 Mandatory Spending | $3.8 trillion (13.6% of GDP) [^] |
|---|---|
| Mandatory Spending 2034 Projection | $6.3 trillion (15.2% of GDP) [^] |
| Mandatory Spending Share of Total Outlays | 73% in 2024, rising to 79% in 2034 [^] |
Certain mandatory spending categories are highly susceptible to post-publication revision. Income Security Programs, such as Unemployment Insurance and SNAP, along with Federal Retirement Programs, are particularly volatile due to their sensitivity to economic conditions and inflation-driven Cost-of-Living Adjustments (COLAs). Student Loan Programs also exhibit significant variability, stemming from intricate subsidy cost estimates influenced by interest rates, borrower behavior, and administrative policy shifts. Additionally, Agricultural Support Programs are unpredictable, driven by global commodity prices, weather patterns, and ad-hoc disaster assistance, making the "other mandatory" spending category a primary source of forecast error [^].
Revisions to mandatory spending typically result in a net upward adjustment. The net directional impact of these revisions on the final FY2024 mandatory spending baseline was likely positive, indicating an upward adjustment. This trend is primarily driven by persistent inflationary pressures, which systematically increase costs for COLA-adjusted programs like federal retirement, SNAP, and SSI, as well as healthcare programs such as Medicaid and ACA subsidies. Programmatic cost growth, especially within student loan programs with their complex Income-Driven Repayment (IDR) plans and potential policy liberalizations, also significantly contributes to these upward revisions. Despite potential offsets from stronger-than-expected economic performance, the structural momentum of mandatory spending growth consistently points towards actual outlays exceeding initial projections, with increases partially counteracting discretionary spending reductions in deficit projections [^].
8. What Factors Drove Higher Federal Interest Payments in 2025?
| CBO Projected FY2025 Net Interest Outlays | $970 billion [^], [^] |
|---|---|
| Treasury Final FY2025 Net Interest Outlays | $981.4 billion [^] |
| Total Deviation FY2025 | $11.4 billion over CBO projection [^] |
Treasury's final net interest outlays for FY2025 exceeded CBO projections. The U.S. Treasury's final net interest outlays for Fiscal Year (FY) 2025 totaled $981.4 billion [^], which represented approximately 14% of the federal government's $7.01 trillion in total spending [^]. This figure was $11.4 billion higher than the Congressional Budget Office's (CBO) final projection of $970 billion, as published in its February 2026 outlook [^], [^]. This deviation amounted to a 1.18% increase over the CBO's estimate [^].
Post-period macroeconomic revisions primarily caused the net interest outlay deviation. The discrepancy between the Treasury's final calculation and the CBO's estimate for Q4 FY2025 was largely driven by post-period revisions to macroeconomic data [^]. Specifically, higher-than-projected inflation adjustments for Treasury Inflation-Protected Securities (TIPS) and a realized short-term interest rate path that exceeded the CBO's assumptions for that quarter contributed to the overage. The Treasury's final calculation incorporates definitive, and sometimes revised, CPI-U data for TIPS principal adjustments, meaning even minor upward revisions to inflation applied to trillions of dollars in TIPS can significantly increase outlays. Similarly, actual short-term interest rates, which influence floating rate notes and new debt issuance, surpassed the CBO's projections for Q4 2025. This difference arises because CBO's projections are based on models and assumptions available at the time of publication, whereas the Treasury's figures reflect actual, realized market conditions [^].
The overage increased the deficit, highlighting forecasting challenges and market impacts. This $11.4 billion overage directly contributed to an increase in the federal budget deficit for FY2025, underscoring the inherent difficulties in accurately forecasting net interest costs [^]. These costs are mandatory and market-driven, not subject to discretionary policy choices. For prediction markets on total government spending, such a non-discretionary increase could have a direct impact on the resolution of market outcomes [^]. Astute market participants would monitor real-time inflation and interest rate movements, modeling their impact on debt costs, to anticipate these types of deviations from official projections and gain an analytical advantage [^].
9. When Will Official FY2025 U.S. Fiscal Data Be Published?
| Official FY2025 Data Release | Friday, October 10, 2025 (U.S [^]. Department of the Treasury) [^] |
|---|---|
| MTS Procedural Lag | 8 business days (Bureau of the Fiscal Service) [^] |
| Earliest FY2025 Estimate | On or around October 7, 2025 (CBO) [^] |
Final FY2025 Monthly Treasury Statement expected October 10. The U.S. Department of the Treasury's Bureau of the Fiscal Service is projected to release the Monthly Treasury Statement (MTS) for September 2025 on Friday, October 10, 2025. This statement serves as the official and most timely source for year-end financial data, providing the first comprehensive accounting of receipts and outlays for Fiscal Year 2025. This publication follows a standard procedural lag time of eight business days after the fiscal year concludes on September 30, 2025.
Earlier reports offer preliminary FY2025 financial insights preceding the official Treasury statement. The Congressional Budget Office (CBO) Monthly Budget Review for September 2025 is anticipated around October 7, 2025 [^]. This CBO report historically precedes the Monthly Treasury Statement by one to three business days and provides an independent estimate of the fiscal year's financial outcomes. Other more comprehensive reports, such as the Office of Management and Budget's final figures and The Financial Report of the U.S. Government, are typically published much later, generally in early 2026, and are thus less relevant for immediate resolution of FY2025 prediction markets [^].
10. What Could Change the Odds
Key Catalysts
Market probabilities for increased government spending in 2025 could rise due to several bullish catalysts. Official upward revisions to the final Fiscal Year 2025 (FY2025) outlays by the U.S. Treasury or Congressional Budget Office (CBO) would be a primary driver [^]. As of November 2025, federal outlays for FY2025 totaled $7.01 trillion, a 4% increase from FY2024. Furthermore, if the "One Big Beautiful Bill Act" (OBBBA), enacted in July 2025, is found to have had a greater impact on FY2025 spending than currently anticipated, this could also push the market higher. The CBO projected the OBBBA to increase deficits by $4.7 trillion over the 2026-2035 period [^].
Conversely, market probabilities could decrease if bearish catalysts emerge, indicating a smaller increase or even a decrease in spending. Official downward revisions to final FY2025 outlays by the U.S. Treasury or CBO would be a significant factor [^]. The CBO previously estimated the FY2025 deficit at $1.8 trillion, a slight decrease from FY2024. Additionally, if new tariff policies implemented since January 2025, projected to reduce deficits by $3.0 trillion over 2026-2035, have a more pronounced deficit-reducing effect for FY2025 than currently factored into market expectations, this could also be a bearish signal for overall spending growth [^]. Robust economic growth in late 2025 or early 2026, if reported in forthcoming indicators, could also retrospectively suggest less government spending was needed in 2025, dampening expectations.
Crucial official reports will provide the final context for FY2025 government spending before the April 1, 2026 settlement. The CBO's "Budget and Economic Outlook: 2026 to 2036," released on February 11, 2026, offers updated baseline projections and final figures for FY2025 [^]. Subsequent Monthly Treasury Statements (MTS) for January, February, and March 2026, typically released mid-month, will provide the most current detailed federal spending data for the initial months of FY2026, offering further insight into trends that may influence perceptions of FY2025 reporting [^]. These reports, alongside ongoing CBO and OMB analyses, are critical for understanding final government spending figures.
Key Dates & Catalysts
- Expiration: April 01, 2026
- Closes: April 01, 2026
11. Decision-Flipping Events
- Trigger: Market probabilities for increased government spending in 2025 could rise due to several bullish catalysts.
- Trigger: Official upward revisions to the final Fiscal Year 2025 (FY2025) outlays by the U.S.
- Trigger: Treasury or Congressional Budget Office (CBO) would be a primary driver [^] .
- Trigger: As of November 2025, federal outlays for FY2025 totaled $7.01 trillion, a 4% increase from FY2024.
13. Historical Resolutions
Historical Resolutions: 2 markets in this series
Outcomes: 2 resolved YES, 0 resolved NO
Recent resolutions:
- KXGOVTSPEND-26-1B: YES (Apr 30, 2025)
- KXGOVTSPEND-26-100B: YES (Aug 06, 2025)
Get Real-Time Research Updates
Sign up for early access to live reports, historical data, and AI-powered market insights delivered to your inbox.
