The federal deficit rose to 1.99 trillion dollars in fiscal 2026, the largest in five years, as interest costs hit a record 1.36 trillion

The federal government took in more money than ever before last year and spent more than ever before, and the spending won by 1.99 trillion dollars. Treasury Department figures released on Friday put the fiscal 2026 deficit at 1.99 trillion dollars, up 217 billion from 1.78 trillion in fiscal 2025. It is the largest annual shortfall since the 2.77 trillion dollar pandemic deficit of fiscal 2021, and the third largest in American history.

Receipts were a record 5.40 trillion dollars, up 3 percent. Outlays were a record 7.40 trillion dollars, up 6 percent. The single largest driver named in the figures is the cost of the debt itself. Debt service outlays totaled a record 1.36 trillion dollars, up 144 billion, or 12 percent, in one year. That category is now larger than every part of the federal budget except Social Security and the combined cost of Medicare and Medicaid. Total national debt passed 40 trillion dollars about two months ago, as of October 18.

Two policy turns show up in the arithmetic. A Supreme Court ruling this year struck down a large portion of the tariffs imposed in the president first year, and the government paid out 145 billion dollars in tariff refunds during the year, cutting net tariff income by 22 billion dollars, an 11 percent decline, to about 173 billion dollars. Defense spending rose by 48 billion dollars. A Treasury official put the deficit at an estimated 6.2 percent of gross domestic product, against an actual 5.8 percent the year before, and declined to say what share of the defense increase reflects the war with Iran.

The final month tells the direction plainly. September closed with a deficit of 27 billion dollars, against a surplus of 198 billion dollars in September a year earlier.

None of this arrives in a crisis year. The economy is growing, and the government is borrowing at a pace the country last sustained while paying for a pandemic. Interest on the debt is now the fastest compounding line in the budget, and every year the total rises, the share of taxes that buys nothing but past borrowing rises with it.