The United States closed out fiscal year 2026 with a budget deficit of nearly $2 trillion, marking a sharp deterioration in the country’s financial position.
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, surpassed only by the pandemic-era deficits of 2020 and 2021, when trillions were pumped into the economy as stimulus.
The 2026 fiscal year recorded highs for both government receipts and outlays, according to a Treasury Department official, underlining the scale of federal spending activity.
Friday’s release confirmed that the U.S. has now run a deficit for 25 consecutive fiscal years, with the last government surplus recorded in 2001.
The growing debt pile has unsettled bond markets, with 10-year and 30-year U.S. Treasury yields hitting 24-year highs last week as traders grew increasingly anxious.
Social Security remained the single largest component of government expenditure, costing nearly $1.7 trillion for the full fiscal year, up from roughly $1.6 trillion in fiscal 2025.
Medicare was the second-largest spending category, coming in at almost $1.1 trillion, compared to slightly under $1 trillion during fiscal 2025.
Net interest on government debt also exceeded $1 trillion for the fiscal year, rising from $970 billion in fiscal 2025, adding further pressure to the overall deficit picture.
Individual income taxes brought in more than $2.8 trillion in receipts, a year-over-year increase of approximately 7%, helping to partially offset the widening gap between spending and revenue.
Corporate income tax generated $381 billion in receipts during fiscal 2026, a decline of roughly $70 billion from fiscal 2025, attributed to tax cuts included in the One Big Beautiful Bill 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 the total debt surpassing $40 trillion earlier this year and more than doubling 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 mounting 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 had promoted sweeping tariffs as a mechanism to boost government revenue and reduce the deficit, but the Supreme Court ruled earlier this year that many of those tariffs were unconstitutional.
The Treasury recorded a historic high for gross customs duties during fiscal 2026, though total customs revenue was reduced by refunds required following the Supreme Court ruling, sending billions back to retailers.
Friday’s report also showed that September’s monthly deficit came in at $27 billion, a stark reversal from the same month in the prior year when the department recorded a surplus of $198 billion.