U.S. fiscal year 2026 sees largest deficit in five years, driven by debt costs

According to Treasury data, the United States ran a deficit of almost $2 trillion in fiscal year 2026, the largest gap in five years. The shortfall is largely attributed to soaring interest expenses on the federal debt, higher defense budgets, and expanding entitlement programs like Social Security and Medicare. The government also had to allocate funds to reimburse illegal tariffs that were invalidated by the Supreme Court earlier in the year.

Policy analyst Maya MacGuineas cautioned that the growing deficit and debt could impair the nation’s ability to respond to future emergencies. Treasury Secretary Scott Bessent said that robust economic growth is critical to reducing the debt load. The deficit comes as the country approaches its midterm elections, where both major parties have floated costly proposals, including a promise by Donald Trump to issue direct payments to adults if Republicans control Congress.