The federal budget deficit for fiscal 2026 totaled nearly $2 trillion, the Treasury Department reported Friday. The fiscal year runs from October through September, and fiscal year 2026 ended two weeks ago on September 30.
The $1.99 trillion 2026 deficit is the third-largest in U.S. history, trailing only the pandemic years of 2020 and 2021. The U.S. has now recorded an annual budget deficit for 25 years in a row.
The deficit is about 12% larger than the deficit recorded in fiscal year 2025. Receipts in 2026 totaled $5.4 trillion, up 3% from the year before, with the majority of revenues coming from individual income taxes ($2.8 trillion) and payroll taxes ($1.8 trillion). Outlays were 6% higher at nearly $7.4 trillion, with the largest spending categories being Social Security ($1.7 trillion), Medicare ($1.1 trillion), net interest on the debt ($1.1 trillion), health ($1 trillion) and defense ($965 billion).
The latest deficit tally comes just weeks after the national debt crossed the $40 trillion mark. The sheer size of the debt, combined with rising interest rates amid persistent inflation, has sharply raised the Treasury’s cost of making interest payments, which are now the third-largest category of outlays in the federal budget. The big jump in deficits and debt comes at an unusual time, in the absence of severe external strains such as a pandemic or recession, and while the economy is growing at a decent clip.
Budget watchdogs said the latest deficit numbers are a reminder that the country needs to change its fiscal course. “America’s fiscal health is failing, and we need to take action to address it,” said Maya MacGuineas of the Committee for a Responsible Federal Budget, which advocates for deficit reduction.
MacGuineas said lawmakers need to come up with a realistic plan to change course, rather than calling for impractical goals like balancing the budget or paying off the debt. “Fiscal discipline requires finding something both achievable and aggressive, and bringing deficits down to 3% of GDP – half their current level – fits that bill and would stabilize debt as a share of the economy,” she said in a statement. “Tough choices will be needed to get there, and we’re running out of time to make them.”
