U.S. budget deficit reportedly nears $2 trillion, its highest level since the pandemic

The $1.99 trillion deficit is the one-year gap between federal spending and revenue. It is separate from the accumulated federal debt.

Treasury estimated that the fiscal 2026 deficit equaled 6.2% of gross domestic product, up from 5.8% in fiscal 2025. The official who gave Reuters that estimate did not specify which GDP projection the department used.

Tariff refunds also widened the gap

Net tariff receipts fell by $22 billion after a Supreme Court ruling negated a large portion of tariffs imposed during the first year of President Donald Trump's second term. The government issued $145 billion in refunds, contributing to an 11% decline in net tariff income to about $173 billion.

Defense spending rose by $48 billion, or 6%, to $917 billion. A Treasury official said the department could not determine how much of that increase was attributable to the U.S.-Israel war with Iran. Spending on Social Security and Medicare also continued to grow.

The final month of the fiscal year produced a $27 billion deficit. In September 2025, the government had recorded a $198 billion surplus.