The United States closed out the 2026 fiscal year with a budget deficit of nearly $2 trillion, underscoring the deepening strain on the country’s finances.
The Treasury Department reported Friday that the deficit reached $1.992 trillion, a 12% increase from the $1.775 trillion shortfall recorded in the prior fiscal year.
The figure ranks as the third-highest annual deficit in U.S. history, trailing only 2020 and 2021, when the federal government deployed trillions in stimulus spending during the Covid-19 pandemic.
The 2026 fiscal year saw record sums for both receipts and outlays, according to a Treasury Department official, reflecting the expanding scale of government activity on both sides of the ledger.
Friday’s data confirms the U.S. has now recorded its 25th consecutive fiscal year operating at a deficit, with the last surplus occurring in 2001 when government revenues exceeded expenditures.
Rising debt levels have rattled bond markets, with traders sending the 10-year and 30-year U.S. Treasury yields to 24-year highs last week as concerns over fiscal sustainability mounted.
Social Security remained the single largest driver of government spending, totaling nearly $1.7 trillion for the fiscal year, up modestly from roughly $1.6 trillion spent in fiscal 2025.
Medicare was the second largest contributor at almost $1.1 trillion, compared to slightly under $1 trillion in fiscal 2025, continuing its upward trajectory as healthcare costs climb.
Net interest on government borrowing also surpassed $1 trillion for the fiscal year, compared to $970 billion in fiscal 2025, adding further pressure to an already strained spending picture.
Individual income taxes provided over $2.8 trillion in receipts, a roughly 7% year-over-year increase, helping offset some of the deficit, while corporate income taxes brought in $381 billion.
Corporate tax receipts fell by approximately $70 billion from fiscal 2025, a decline attributed to tax cuts included in the One Big Beautiful Bill act passed by Congress last year.
The U.S. paid out more than $1.3 trillion in interest on the national public debt during fiscal 2026, with total debt exceeding $40 trillion earlier this year and having more than doubled over the past decade.
Treasury Secretary Scott Bessent told CNBC in August that the administration believes the country can “grow our way out of” its escalating debt burden.
“Our message to our allies, our trading partners, is that global growth is the way to take care of this mountain of debt,” Bessent said in August.
President Donald Trump has promoted sweeping tariffs as a revenue-generating strategy to reduce the deficit, though the Supreme Court ruled earlier this year that many of those tariffs were unconstitutional.
While the Treasury recorded a historic high for gross customs duties during the fiscal year, total customs revenue was reduced by refunds required following the Supreme Court’s ruling, sending billions back to retailers.
The Treasury also reported that September’s monthly deficit came in at $27 billion, a sharp reversal from the prior year’s September surplus of $198 billion.
