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Macro EconomyMediumUpdated×4•Originally published 16 October 2026•Updated 19 October 2026•
4 min read

U.S. budget deficit reaches $1.992 trillion as debt costs hit record

Key Facts

1The federal deficit reached $1.992 trillion, equivalent to about 6.2% of GDP.
2Total debt-servicing spending rose to a record $1.36 trillion, an annual increase of 12%.
3The federal deficit increased by $217 billion from the previous fiscal year.
4Net customs revenue fell 11% to about $173 billion.

The U.S. federal budget deficit reached $1.992 trillion in fiscal 2026 as total debt-servicing spending rose to a record, according to Treasury figures reported by MarketWatch and Reuters. The deficit increased by $217 billion from the previous fiscal year, according to Reuters, as the gap between spending and revenue widened. The annual deficit was the largest since 2021, according to MarketWatch. Treasury officials estimated the deficit at about 6.2% of gross domestic product, a measure of the fiscal gap relative to the U.S. economy. On a monthly basis, September recorded a deficit of $27 billion, compared with a surplus of $198 billion in the same month a year earlier, according to Reuters.

In its preliminary estimates for fiscal 2026, the Congressional Budget Office put federal spending at $7,396 billion, compared with $7,010 billion in fiscal 2025. The estimated increase in spending was $386 billion, or 6% year on year, according to the office. Meanwhile, the office estimated revenue at $5,403 billion, compared with $5,235 billion in the previous year. It put the increase in receipts at $169 billion, or 3%, a slower pace than spending growth over the same period. Among revenue categories, corporate income taxes fell to $382 billion from $452 billion, a decline of $70 billion, equivalent to 16%, according to the office's preliminary estimates.

Total annual debt-servicing spending reached a record $1.36 trillion, according to Reuters. That spending increased by $144 billion from the previous fiscal year. The annual rate of increase was 12%, according to the agency, as the federal deficit widened. The Congressional Budget Office, in its preliminary calculations published before the final Treasury statement, estimated net interest payments at $1,143 billion for fiscal 2026. The office compared that estimate with net interest of $1,028 billion in the previous fiscal year, putting the annual increase at $115 billion, or 11%.

On tariffs, refunds totaled $145 billion during the fiscal year, according to Reuters. The refunds followed a Supreme Court ruling that struck down a large portion of the tariffs imposed by Trump. Net customs revenue fell 11% to about $173 billion, a decline that contributed to the widening deficit, according to the agency. Over the longer term, the Congressional Budget Office estimated that trade policy changes would increase the primary deficit by $0.7 trillion over 2027–2036, compared with the February 2026 baseline. The office said the impact of those changes also included "$0.2 trillion in debt-servicing costs" over the same period, alongside the expected increase in the primary deficit.

The annual figures follow an International Monetary Fund review of the U.S. economy in April 2026, which projected that the general government deficit would remain within a range of 7–7.5% of GDP. In the same review, the fund projected that U.S. general government gross debt would exceed 140% of GDP by 2031. IMF directors recommended fiscal adjustment to address chronic imbalances in U.S. public finances. Their recommendations included raising federal revenue among the proposed measures to address those imbalances. They also called for "rebalancing entitlement programs," with the fiscal adjustment recommendations covering both revenue and spending.

In trading on October 16, 2026, the dollar index fell 0.26%, according to Reuters, amid concerns over financing for artificial intelligence companies and interest rate expectations. The yield on 10-year U.S. Treasury notes rose by 0.17 basis points to 5.085% during the same session, according to the agency. On upcoming releases, the Treasury Department set November 2, 2026, for publication of its quarterly financing estimates. That will be followed on November 4, 2026, by the release of the refunding policy statement and Treasury Borrowing Advisory Committee documents, according to the department's announced schedule. The Congressional Budget Office is scheduled to publish the summary of its annual budget review for fiscal 2026 on November 9, according to its release calendar.