The federal government spent $1.992 trillion more than it took in during the 2026 budget year, which ended Sept. 30, the Treasury Department said Friday. That’s up about 12% from $1.775 trillion the year before and works out to roughly 6% of the whole economy, Yahoo Finance reported. It’s the third-largest deficit in U.S. history, behind only the pandemic years of 2020 and 2021.
Washington collected a record $5.4 trillion and spent a record $7.4 trillion, according to Treasury data. The gap between those two numbers is what gets borrowed, and the national debt has now passed $40 trillion.
Why did the deficit get bigger this year?
Three big reasons. First, interest. The government paid $1.1 trillion just in interest on its debt, a record 3.4% of GDP. That’s more than it spent on Medicare or the military, and only Social Security costs more. Higher rates mean every dollar borrowed costs more to carry.
Second, tariff refunds. After the Supreme Court struck down President Trump’s tariffs in February, the government had to pay back $144.6 billion, which wiped out nearly half the $317.8 billion in tariff money it had collected. Third, spending kept climbing. The final number came in about $140 billion higher than the Congressional Budget Office projected in February.
Treasury Secretary Scott Bessent and other officials have called the number a blip driven by the tariff refunds. The Committee for a Responsible Federal Budget disagreed, saying “the country’s future fiscal outlook is even more dismal” and warning deficits could hit $3.1 trillion a year by 2036 if nothing changes.
How does the federal deficit affect me?
Mostly through interest rates. When the government borrows this much, it competes with everyone else for money, which helps keep rates on mortgages, car loans and credit cards high. The 10-year Treasury yield, which mortgage rates follow, hit its highest level since 2002 earlier this month.
- Homebuyers: big deficits make it harder for mortgage rates to fall much, even if the Fed cuts.
- Savers: the upside is that savings accounts and Treasury bills still pay decent interest.
- Taxpayers: $1.1 trillion a year in interest is money that doesn’t go to roads, schools or tax cuts. Sooner or later, it means higher taxes, lower spending or both.
- Retirees: Social Security’s trust fund is a separate problem, but a deficit this size makes any fix harder to pay for.
The BeezLoop Take
Calling a $2 trillion deficit a blip doesn’t hold up. Yes, the tariff refunds added a one-time hit. But interest costs alone are now $1.1 trillion a year and climbing, and the government spent a record amount while taking in a record amount. That’s not a one-year problem.
Both parties own this. Neither has offered a real plan to close the gap, and three weeks before the midterms, candidates are promising $5,000 checks and new spending instead. Voters should ask anyone running how they’d pay for what they’re promising.
The open question: will either party put a real deficit plan on the table after Nov. 3, or will interest costs keep eating the budget?
Also on BeezLoop: the 10-year Treasury yield hit its highest since 2002, and Trump’s promise of $5,000 checks if Republicans win.
Sources: Yahoo Finance · U.S. Treasury Fiscal Data · CNBC Television (video)
