U.S. deficit nears $1.4 trillion as interest costs climb
CBO says federal borrowing through June topped last year’s pace, while net interest on public debt reached $857 billion.
By Hana Yoshida · Markets Reporter
3 min read
The federal deficit reached just under $1.4 trillion in the first nine months of fiscal 2026, the Congressional Budget Office said, putting Washington ahead of last year’s borrowing pace. The figures underscore the rising cost of financing the national debt as interest payments take a larger share of federal spending.
The CBO’s latest monthly budget review covers the fiscal year that began in October. For the same nine-month period in fiscal 2025, the deficit was just over $1.3 trillion, according to the CBO figures cited in the review.
That puts average borrowing for fiscal 2026 so far at about $155 billion a month, or roughly $39 billion a week, based on the CBO totals. Treasury fiscal data put total U.S. national debt at $39.4 trillion at the time of the report, a sum built up under both Republican and Democratic administrations.
Interest costs rise with debt and rates
Net interest on the public debt totaled $857 billion in the first nine months of the fiscal year, the CBO said. That works out to about $23.8 billion a week.
The CBO said interest costs were about $100 billion higher than in the comparable period of fiscal 2025, an increase of 13%. The agency attributed the rise to a larger overall debt load and higher long-term interest rates.
Interest spending has grown large enough to exceed several other federal outlays combined. According to the CBO figures cited in the report, net interest was $20 billion more than combined spending for the Departments of Defense, Commerce, Homeland Security and Education, along with the Environmental Protection Agency, the Small Business Administration and the U.S. Coronavirus Refundable Credits program.
Major benefit programs also added pressure to federal spending, the CBO said. Social Security outlays rose by $62 billion, or 5%, because average benefits increased and more people received benefits.
Medicare spending climbed by $58 billion, or 8%, as enrollment and service payment rates increased, according to the CBO. Medicaid outlays grew by $49 billion, or 10%, which the agency linked to higher costs per enrollee.
Aging population adds pressure
Demographic data point to continued demand for retirement and health programs. The Census Bureau said the U.S. median age rose to 39.4 in 2025 from 39.2 in 2024.
The Census Bureau also reported a shift in the older population’s gender balance. In 2001, there were 70.6 men for every 100 women age 65 and older; by 2025, the ratio had risen to 81.6.
The Committee for a Responsible Federal Budget, a group that advocates lower deficits, said the latest CBO numbers show fiscal 2026 has moved beyond last year’s deficit level and is likely to remain higher through the end of the fiscal year. Maya MacGuineas, the group’s president, said the government could borrow $2 trillion or more this fiscal year despite economic growth and low unemployment.
MacGuineas said policymakers should address entitlement programs, spending and revenue. She also said Social Security and Medicare are within seven years of trust fund exhaustion and warned that delayed action could lead to broad benefit cuts.
The committee has backed a deficit target of 3% of gross domestic product, which MacGuineas described as about half the current level. She said elected officials should be direct with the public about the risks of staying on the current fiscal path.
This story draws on original reporting from Fortune.