Federal spending outran revenue by nearly $2 trillion in fiscal 2026 (ended September 30, 2026), Friday's year-end Treasury report showed. The shortfall was wider than a year earlier and the largest since fiscal 2021, when pandemic relief swelled federal outlays. Both receipts and outlays set records, a Treasury official said, meaning revenue grew but spending grew faster. It was also the first budget year to run entirely under President Donald Trump's second administration.
The fastest-growing line in the budget was not a program but the cost of carrying old borrowing. Interest on the public debt reached a record for the year and now trails only Social Security and the combined health programs Medicare and Medicaid as a spending category. A debt load that crossed a new milestone in August, carried at higher long-term rates, drove the increase, according to CBO data. The war with Iran that began in late February pushed up oil prices and long-term Treasury yields, which reached multi-decade highs last week.
Tariffs, which the White House pitched as a way to pay down debt, cut the other way. Corporate tax receipts also fell as companies used expanded investment deductions in last year's tax-and-spending law, while individual income and payroll taxes rose.
Fiscal watchdogs and markets read the report as a warning. The Committee for a Responsible Federal Budget called the shortfall among the highest in U.S. history outside a recession. Treasury Secretary Scott Bessent has argued the country can grow its way out of the debt.