The budget deficit swells, while the cost of debt rises
Summary
The U.S. budget deficit reached $2 trillion in the fiscal year ending in 2026, the largest since 2021. Rising interest costs on the national debt are a major factor, causing more government borrowing and budget pressure.Key Facts
- The budget deficit for fiscal year 2026 is about $2 trillion.
- The government paid $1.052 trillion in net interest on the national debt in 2026.
- Interest costs were the third-largest government expense after Social Security ($1.67 trillion) and Medicare ($1.07 trillion).
- Net interest payments are estimated at 3.3% of the country’s Gross Domestic Product (GDP), a record high.
- Rising interest rates since 2021 have increased the cost of borrowing.
- Higher interest costs add to the deficit, forcing the government to borrow more money.
- Similar high interest costs last occurred under President George H.W. Bush, leading to bipartisan efforts to reduce the deficit in the 1990s.
- Currently, there is little political willingness to increase taxes or cut spending to reduce the deficit.
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