- U.S. borrowed $2 trillion in just 11 months of fiscal 2026, despite record tax revenue.
- Interest payments on the national debt jumped 14 percent and now outpace defense spending.
- Social Security, Medicare and Medicaid costs kept climbing faster than the economy can sustain.
- Corporate tax collections fell sharply while tariff revenue came in well below projections.
- Adjusted for payment timing, this year's deficit is actually running higher than last years.
The math no longer works in Washington. Despite collecting more tax revenue than ever before, the U.S. government has borrowed $2 trillion during the first 11 months of fiscal year 2026, according to a Congressional Budget Office report released September 9. The shortfall is driven by surging interest payments on the national debt, growing entitlement costs for Social Security and Medicare, and the timing of certain federal payments. The Committee for a Responsible Federal Budget (CRFB) warns that delaying action could leave future generations with damage "that can't be undone."
Interest costs now exceed defense spending
The single largest driver of the widening deficit is the cost of servicing existing debt. Net interest payments climbed $117 billion, a 14% increase, during the first 10 months of fiscal 2026 compared with the same period in 2025 — and according to CRFB, the government is now spending more annually on interest than on national defense.
Higher long-term interest rates combined with a national debt that has now surpassed $40 trillion have locked Washington into an expensive cycle: more borrowing means more interest, which requires more borrowing. CRFB President Maya MacGuineas noted that debt held by the public now exceeds the size of the entire U.S. economy, and that trust funds for Social Security and Medicare face insolvency within a decade.
Entitlement spending keeps climbing
Mandatory programs continue growing faster than the economy can absorb. Social Security payments rose $70 billion (5%) over the same 10-month stretch, driven by inflation adjustments and a growing number of beneficiaries. Medicare spending increased $66 billion (8%) on higher enrollment and payment rates, while Medicaid costs grew $45 billion (8%) as expenses per enrollee rose. MacGuineas called a deficit approaching $2 trillion outside of a recession "not normal."
Tax revenue grows, but tariffs fall short of expectations
Tax collections aren't the problem; they're near record highs, just outpaced by spending. Payroll and income tax revenue rose $202 billion (5%) over the same period, with worker withholdings up $141 billion amid rising wages. Corporate income tax collections, however, fell $89 billion (23%), largely due to expanded investment deductions under the One Big Beautiful Bill Act. Customs duties, including tariffs, rose $18 billion (13%) compared with a year earlier, although monthly collections have declined since May as roughly $100 billion in tariff refunds went out following a February Supreme Court ruling. CBO now projects total federal revenue will come in about $200 billion below its February estimate, largely because of the tariff shortfall.
Few easy options remain
The picture may be even worse than the headline number suggests. Adjusting for a Labor Day-related payment shift that moved obligations from September 2025 into August, this year's 11-month deficit would actually be $82 billion higher than the same period last year — not $6 billion lower, as the unadjusted comparison implies. MacGuineas urged lawmakers to "agree to a plan to target reducing deficits to 3% of GDP — half their current level — and get to work on shoring up our trust funds," warning that continued inaction risks leaving lasting damage for future generations.
With one month left in the fiscal year and borrowing still climbing, Washington's window to change course keeps narrowing. The federal government hasn't run a budget surplus since 2001, and deficits have widened in nearly every year since in a trend lawmakers on both sides of the aisle have so far failed to reverse.
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