Good morning. As I write this, officials from the National Transportation Safety Board and the Federal Aviation Administration are investigating the midair collision between a U.S. Army helicopter and an American Airlines plane in Washington last night. Investments in those federal agencies have helped make such tragedies so rare and the U.S. the gold standard for aviation safety. Excellence isn’t cheap. Like his predecessors, President Donald Trump faces the challenge of maintaining excellence in core functions and agencies like these, and finding a way to pay for it all.

There have been varying estimates about the financial impact of the new Administration’s policies, from imposing tariffs and spending freezes to cutting taxes and the size of the federal workforce . With that in mind, keep an eye on the federal deficit, which grew 8% in fiscal 2024 to $1.8 trillion . In the last quarter, the first three months of fiscal 2025, it rose to $711 billion, almost 40% higher than the same time last year.

The deficit represents how much federal spending exceeded the money it took in through taxes, fees and other sources. It contributes to our $32.2 trillion national debt , but that’s another issue. Along with reducing the deficit by raising taxes and cutting costs ( via DOGE or other means), the government issues Treasury bonds, bills and other securities to fund the shortfall. Some of that debt is held by investors in Japan, China, Canada, the U.K., and other countries that are now bracing for tariffs and a rockier relationship with Washington. (The trade deficit warrants a closer look, too, as there’s certainly confusion when it comes to the gap with Canada and others.)

The size of the deficit concerns investors like Bruce Lee , founder and CEO of Keebeck Wealth Management. “We've had our hands in the cookie jar for a long period of time,” says Lee. “The party is great till somebody has to pay for it.”

In one of her final acts as Treasury Secretary, Janet Yellen told Congress that the department needs to raise the debt limit and begin using “extraordinary measures” to prevent the U.S. from defaulting on its debt. Over to you, Scott Bessent .

Lee mentioned a word I associate with Greece, circa 2010: austerity. That might be unpopular. Spending on education, Medicare, and defense is sacrosanct to many voters. Austerity could mean tighter military budgets, delayed retirements, higher estate taxes, austerity bonds or more.