The Deficit Hit $2.0 Trillion. Net Interest Ran Ahead of Both Medicare and Defense Spending.

The federal government ran a deficit of about $2.0 trillion in the fiscal year that ended September 30. The Congressional Budget Office estimated that on October 8. That is $218 billion more than the year before. Revenue grew $169 billion, or 3 percent. Outlays grew an estimated $386 billion, or 6 percent.

Interest ran ahead of Medicare and defense

Treasury's monthly statement through August, the latest it has published, puts net interest at $1.017 trillion for the first eleven months of fiscal 2026. A year earlier it was $933 billion. That exceeds the Medicare line at $979 billion and the national defense line at $876 billion. Only Social Security, at $1.526 trillion, was larger. Reason, citing CBO's full-year figures, reported that interest payments rose 11 percent for the year and topped $1.1 trillion.

CBO's summary lists higher outlays for net interest, major benefit programs, defense and education. Reason reported Social Security up 5 percent, Medicare and Medicaid each up 8 percent, and military spending up 5 percent. One line does not fit cleanly. Treasury's education category was running 47 percent below last year through August, which squares with a full-year increase only if September swung it. The September statement will show.

Individuals paid more, corporations paid less

Through August, individual income tax receipts were $2.548 trillion, up 8 percent from $2.358 trillion. Corporate income tax receipts were $294.9 billion, down 24 percent from $389.6 billion. Payroll and other social insurance receipts rose 3 percent to $1.663 trillion. CBO's summary credits the revenue growth to individual income and payroll taxes. Treasury's tables do not say why corporate receipts fell, and none of the sources reviewed for this story explains it.

Tariffs did not fill the gap. Reason reported, citing CBO, that customs duties for the year totaled $182 billion, down 11 percent from 2025. Roughly $130 billion in refunds went out on tariffs the Supreme Court ruled unlawful earlier this year. Treasury's year-to-date line through August looks flatter, $167.3 billion against $165.2 billion. The two figures cover different spans, and the full CBO report could not be retrieved for this story, so the difference is not reconciled here. On the $182 billion figure, tariffs covered about 9 percent of the deficit.

Two readings of the same arithmetic

David Ditch, a policy analyst at the Cato Institute, put the blame on benefits. "The economy can't keep pace with the relentless growth of programs such as Social Security and Medicare," he told Reason.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a group that advocates deficit reduction, pointed at the debt itself. "It is no surprise that interest rates have climbed so much over the past few months," she said in a statement. That is her read of cause and effect, not a CBO finding. She called the 2026 deficit the highest ever outside of a war or recession. She said policymakers should aim for 3 percent of GDP, which Reason described as about half the 2026 level. Reason also cited reports that Treasury Secretary Scott Bessent has advised the administration to adopt the same target by 2028.

How 2026 compares

Fiscal 2025 closed with a deficit of $1.775 trillion in Treasury's records, so 2026 ran about 12 percent higher. Reason reported that only the two pandemic-year deficits were larger, which makes 2026 the third largest on record. Reason also noted two proposals on the horizon. Congress is expected to consider a large military spending increase in the post-election lame duck session. The president has promised $5,000 payments to every American, which Reason estimated would cost well over $1 trillion. Reason described both as proposals.

Treasury's September statement will set the final figure. Whatever it shows, interest is the one line no appropriations bill sets.