Deficit Widens to $1.99 Trillion
The United States closed fiscal 2026 with a budget deficit of $1.99 trillion, the Treasury Department reported for the year ended September 30. That marks a roughly 12% increase from the $1.77 trillion shortfall recorded in the prior fiscal year. As a share of the economy, the deficit equaled about 6.2% of GDP in 2026, up from 5.9% in 2025, according to Treasury data.[S1]
The shortfall is unusually large for a country not at war and not in recession, the Washington Examiner noted, underscoring a long-term mismatch between what the government spends and what it collects. The monthly picture also worsened: September’s deficit came in at $27 billion, reversing a $198 billion surplus in the same month a year earlier.[S1][S2]
Spending, Revenue and Interest Costs
According to the Treasury Department, Social Security took the biggest slice of federal outlays at $1.7 trillion, with Medicare next at $1.1 trillion. Net interest costs exceeded $1 trillion this year, up from $970 billion a year earlier. Interest paid on the public debt by itself grew $144 billion, a 12% increase, reaching $1.360 trillion. Meanwhile, individual income taxes brought in $2.88 trillion of revenue in fiscal 2026.[S1]
The Treasury Department linked the higher borrowing costs to rising interest rates and increased debt-service spending. The 10-year note yield moved from below 4% in October 2025 to more than 5.20% by the end of September 2026. Meanwhile, the public debt crossed the $40 trillion threshold during the year, reaching $41.172 trillion as of September 30.[S1]
Tariff Refunds and Political Reactions
A Supreme Court reversal of a broad set of tariffs imposed by Donald Trump earlier in the year triggered refunds that added $145 billion to the federal government’s costs, according to the Treasury Department. Treasury Secretary Scott Bessent told CNBC in August that the U.S. can grow its way out of its increasing debt pile, saying that global growth is the way to take care of what he called a mountain of debt.[S1]
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, warned that when the next crisis strikes, the country will almost certainly be more indebted than ever before entering a crisis, which will limit its capacity to respond and exacerbate the damage. Her comments came as the deficit neared $2 trillion.[S1]
