US Budget Deficit Hits $1.99 Trillion in FY26, Highest Since 2021

The US federal budget deficit reached $1.99 trillion in fiscal year 2026, marking its highest level since 2021. The shortfall increased 12 percent from $1.78 trillion in FY2025, according to Treasury Department data, despite President Donald Trump's stated commitments to reduce federal spending and deficits.

Federal expenditure rose 6 percent to $7.40 trillion during the financial year ended September 30, while revenue climbed only 3 percent to $5.40 trillion. Interest payments on government debt jumped $144 billion to a record $1.36 trillion, reflecting rising borrowing costs. Total US government debt has reached approximately $40.3 trillion, with around $32 trillion publicly held.

The deficit was widened by a Supreme Court ruling in February that overturned Trump's global tariffs, leading to $145 billion in customs refunds. Defence spending also rose $48 billion to $917 billion. The deficit now represents 6.2 percent of gross domestic product, compared with 5.8 percent in the previous year, remaining above Treasury Secretary Scott Bessent's objective of reducing it to 3 percent of GDP.