The federal government closed out fiscal 2026 with a budget shortfall of $1.992 trillion, according to final figures released Friday by the Treasury Department, underscoring the scale of borrowing that has become routine in Washington even during periods of economic expansion.
The deficit equaled roughly 6% of gross domestic product and reflected $5.403 trillion in total receipts against $7.396 trillion in outlays for the 12 months ended Sept. 30. The result marked a 12% increase from the $1.775 trillion gap recorded in fiscal 2025.
Final tabulations appeared in the Treasury’s Monthly Statement for September, the closing month of the government’s fiscal calendar. The reading represents the highest annual deficit outside of 2020 and 2021, when pandemic-era relief programs pushed borrowing to unprecedented levels.
Gross national debt has climbed past $40.3 trillion, according to the latest Debt to the Penny data from the Treasury, after crossing the $40 trillion threshold in August.
Treasury Secretary Scott Bessent has pointed to Supreme Court-ordered tariff refunds as a key factor behind the widening gap. The government returned $144.6 billion in tariffs over the past year after the court’s February ruling invalidated most of the tariff increases from President Donald Trump’s second term. The administration is pursuing alternative legislative routes to establish new tariffs.
But analyses point to multiple drivers beyond the refunds. Spending grew more than 5% to $7.4 trillion during the period, while receipts rose roughly 3% to $5.4 trillion. The Hamilton Project’s tracker of government expenditures shows outlays have climbed steadily through 2026, with spending higher in each of the past three calendar years.
The previous year’s deficit also appeared narrower due to an accounting measure. The 2025 Republican tax act imposed tighter limits on student loans, which the Treasury recorded as a spending reduction for fiscal 2025.
Interest costs on the debt have become a major budget item. Annual interest payments now total $1.1 trillion, a record 3.4% of GDP, according to the Committee for a Responsible Budget. That makes debt service the second-largest line item in the federal budget, trailing only Social Security and exceeding both Medicare and defense spending.
The independent budget watchdog group warned in a recent analysis that the country’s fiscal outlook is deteriorating, projecting annual deficits could reach $3.1 trillion by 2036 without a change in trajectory.
Fiscal 2026 marks the fourth consecutive year with a deficit of approximately $2 trillion. Economists consider a gap of this magnitude elevated for a period of relatively low unemployment, noting that shortfalls of this size were previously seen only during recessions or major wars.
Members of the Trump administration have sought to characterize the latest reading as a temporary blip tied to the tariff refunds, maintaining that the fiscal situation is coming under control.