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National Debt Surpasses 100% of GDP

By Yuval Rosenberg and Michael Rainey

The Pentagon (SOPA Images)

Happy Friday! President Trump today reversed course and reinstated canceled rallies for this weekend in Kansas and Iowa. Trump told reporters that his change of heart, with visits to both states now planned for Sunday, was because he had gotten requests from people in both states that he show up in person. But the president reportedly had been bothered by media coverage questioning the cancellations of his final midterm rallies, and CNN says that Trump himself "demanded the rallies be reinstated." Trump said he still plans to hold several "telerallies" for candidates on Monday. Have a happy Halloween!

Pentagon Lowers Its Sights on $1.5 Trillion Budget Request: Report

The Trump administration is seeking $1.5 trillion in defense funding from Congress for fiscal year 2027, a nearly 50% increase from current levels, but Pentagon officials reportedly now believe that the super-sized budget request will probably not be fulfilled.

The record-setting request is intended to refill stockpiles of weapons depleted during the war with Iran while also making investments in new technologies and systems, including President Trump's "Golden Dome" missile shield and a new generation of "Trump-class" battleships.

Republicans had hoped to pass part of the massive budget via the reconciliation process, which would allow them to push through a $350 billion boost without any Democratic votes, but there are now serious doubts about whether GOP lawmakers can unify to pass the legislation in the final weeks of the current Congress. As a result, as Politico's Mark Satter, Paul McLeary and Audrey Decker report, defense officials and congressional staff are now working on a smaller budget plan closer to $1.1 trillion, even as the administration continues to maintain that it still wants the larger number.

"GOP infighting in both chambers has already imperiled the odds of passing even one piece of the $1.5 trillion total," Satter, McLeary and Decker write. "Top Senate Republicans have warned they don't have enough votes to pass a party-line spending package. And House Republicans have threatened to withhold their votes over the administration's handling of foreign policy and a reluctance to devote more money to the military."

Whatever the final number, the funding issue will return to the front burner after the midterm elections. The Pentagon, along with the rest of the federal government, is funded through December 11 via a short-term continuing resolution, and lawmakers will need to scramble to hammer out a deal to make sure funding continues.

Number of the Week: 100.03%

For the first time since 1946, the national debt edged past 100% of the size of the economy for the fiscal year that ended on September 30, according to government data.

As The Wall Street Journal's Richard Rubin reported, debt held by the public at the end of fiscal 2026 was $32.2 trillion. After the Commerce Department on Thursday reported its first estimate of gross domestic product for the July-September quarter, we now know that the debt as of the end of September was 100.03% of GDP for the fiscal year. The debt-to-GDP ratio reached an all-time high of 106% in 1946, following World War II.

We already knew that the budget deficit for fiscal year 2026 grew by about 12% compared to fiscal 2025, topping $1.99 trillion.

Chart of the Week: Diesel-Powered Democrats

Chris Krueger of the TD Cowen Washington Research Group sent clients this chart highlighting the parallels between diesel prices and the likelihood of a Democratic "blue wave," as projected by prediction markets. Democrats are now favored to win control of the House, even without winning any "toss-up" races, according to the Cook Political Report. Cook rates the race for the Senate as being closer, with control of that chamber expected to be determined by seven toss-up contests and potentially four others that now lean toward one party or the other.

TD Cowen blue wave chart

Fiscal News Roundup

Views and Analysis