US Annual Budget Deficit Swells to $1.99 Trillion, Largest Shortfall in Five Years

The US federal budget deficit for fiscal year 2026, ending September 30, widened to $1.99 trillion, Treasury Department figures released on October 16 showed — a $217 billion increase over the previous year's $1.78 trillion gap and the largest shortfall in five years. Total federal outlays hit a record $7.40 trillion while total receipts reached a record $5.40 trillion, producing a deficit-to-GDP ratio of 6.2%, up from 5.8% in fiscal 2025. The biggest single driver was interest on the national debt: debt-service costs surged to a record $1.36 trillion, a 12% year-on-year rise that now makes interest payments the third-largest category of federal spending, exceeded only by Social Security and the combined Medicare/Medicaid block. A Supreme Court ruling that invalidated a large portion of tariffs levied during President Donald Trump's second term triggered $145 billion in refunds, cutting net tariff income by 11% to roughly $173 billion. Defence spending also rose 6% to $917 billion. The figures undercut the administration's claims of meaningful fiscal savings and drew immediate warnings from budget analysts that the national debt, already above $40 trillion, would continue to climb. The deficit is the third-largest on record, surpassed only by the pandemic-year shortfalls of fiscal 2020 and 2021.