An electronic display shows the national debt in Washington, August 19, 2026.
Mandel And | AFP Getty Images
The U.S. finished fiscal year 2026 with a budget deficit of nearly $2 trillion, the latest measurement to underline the country’s level of financial stress.
The $1.992 trillion figure is about 12% higher than the $1.775 trillion deficit in the previous fiscal year, the Treasury Department reported Friday.
This is the third highest annual deficit in US history, behind only 2020 and 2021, when the federal government spent trillions of dollars in financial stimulus amid the Covid-19 pandemic. Fiscal year 2026 sees record numbers for receipts and expenditures, according to Treasury Department officials.
With Friday’s release, the US officially recorded its 25th fiscal year with a deficit. The government last recorded a surplus – meaning profits are greater than debts – in 2001.
Friday’s report offers fresh evidence of how the rapidly piling up of US debt is dragging down the nation’s financial health. Rising debt bills have helped exacerbate angst among bond traders, who posted on 10 years and 30 years US Treasury yields hit a 24-year high last week.
Where does the debt come from?
Social Security is the largest chunk of government spending at nearly $1.7 trillion for the full fiscal year, down from an estimated $1.6 trillion in 2025.
Medicare is the second largest contributor, with costs of nearly $1.1 trillion for the fiscal year. By comparison, government-run health programs need less than $1 trillion in fiscal 2025.
Net interest — the Treasury’s calculation of gross interest minus interest earned — also exceeded $1 trillion for the fiscal year. In fiscal year 2025, net interest totaled $970 billion.
Individual income taxes helped reduce the total deficit by raising more than $2.8 trillion, an increase of about 7% annually. The corporate income tax provides receipts of $381 billion in fiscal year 2026. This is a decrease of about $70 billion from fiscal 2025 that comes from tax cuts included in the One Big Beautiful Bill of action passed by Congress last year.
In fiscal year 2026, the US will spend more than $1.3 trillion in interest on the national public debt. The total debt exceeded $40 trillion earlier this year and has doubled over the last decade.
Treasury Secretary Scott Bessent told CNBC in August that the US could “exit” its growing debt pile.
“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 laid out plans for broad and steep tariffs as a way to raise revenue and reduce government debt. The White House has moved forward with a strategy of increasing tariffs on trading partners despite a Supreme Court ruling earlier this year that many of Trump’s actions are unconstitutional.
The Treasury is eyeing a record high for excise duty in fiscal year 2026, according to department officials. But total revenue from customs took a hit because refunds were required after the Supreme Court’s ruling, which sent billions of dollars back to retailers.
The Treasury also reported on Friday that the September monthly deficit came in at $27 billion, a reversal from the previous year, when the department saw a surplus of $198 billion in the month.