Federal deficit reaches $1.99 trillion, highest since 2021

The federal deficit reached $1.99 trillion in fiscal 2026, $217 billion more than the previous year and the largest shortfall since 2021, Reuters reported, citing Treasury figures. The increase came even as receipts reached a record: federal spending grew faster than revenue.

Fiscal 2026 ended Sept. 30. For the year, the government collected $5.40 trillion and spent $7.40 trillion, according to the reported figures. The deficit is the amount by which outlays exceeded receipts during the fiscal year. It describes that year’s gap, not the total federal debt accumulated over time.

Spending rose faster than receipts

Both receipts and outlays set records, but their year-over-year growth rates differed. Receipts rose 3% from fiscal 2025, while outlays increased 6%. In dollar terms, spending grew by more than twice as much as revenue. That difference explains how the shortfall could widen even with record receipts: the increase in collections did not match the increase in outlays.

The gap between the changes in spending and revenue is central to the year’s result. Receipts increased by $169 billion, while outlays increased by $386 billion. The $217 billion difference between those increases matches the reported year-over-year growth in the deficit.

Debt-service outlays were another notable part of the spending picture. Reuters reported that they reached a record $1.36 trillion, an increase of $144 billion, or 12%, from fiscal 2025. That is a reported category of annual outlays; it should not be read as the total national debt or treated as a measure of all federal spending.

The comparison with fiscal 2021 provides longer-term context. That year’s deficit was $2.77 trillion, higher than the fiscal 2026 shortfall. Reuters described the latest result as the largest since 2021, placing it below that pandemic-era peak but above the deficits in the intervening fiscal years.

Year-end figures followed an earlier CBO estimate

On Oct. 8, the Congressional Budget Office estimated a $2.0 trillion deficit for fiscal 2026, $218 billion more than in fiscal 2025. The estimate preceded the fiscal year-end Treasury figures reported by Reuters on Oct. 16, so it is an earlier projection rather than the reported completed-year result.

The CBO’s estimate was close to the reported Treasury figure. CBO also projected a $169 billion, or 3%, increase in receipts and a $386 billion, or 6%, increase in outlays—the same rounded changes Reuters reported for the completed fiscal year. The $1 billion difference between the two accounts of the year-over-year deficit increase, and the small difference between the $2.0 trillion estimate and $1.99 trillion reported result, reflect figures presented at different levels of precision, not a substantial gap between them.

The Bureau of the Fiscal Service describes the Monthly Treasury Statement as a summary of federal receipts, outlays, the surplus or deficit, and financing. It says the statement draws on data from federal entities, disbursing officers and Federal Reserve Banks. The fiscal-year totals document the government’s receipts and spending; the figures themselves do not change tax rates, spending programs or benefits.