Federal budget deficit climbs to $2 trillion as fiscal jitters multiply
By Tami Luhby, CNN
(CNN) — The federal budget deficit rose to nearly $2 trillion for the past fiscal year, spurred in part by ballooning interest payments and tariff refunds, the Congressional Budget Office reported Thursday.
The gap between the revenue the federal government collects and the amount it spends widened by $218 billion, or 12%, in the last fiscal year, which ended September 30.
Net interest payments on the public debt topped $1 trillion for the first time, driven up 11% by the nation’s skyrocketing debt levels and higher interest rates. The US spent more on interest than on any category other than Social Security.
The deficit also grew because the Trump administration had to issue refunds after the Supreme Court found that certain global tariffs it imposed violated federal law. The CBO estimates that about $130 billion in tariff refunds was issued in the most recent fiscal year.
Although the economy is in relatively good shape, the nation’s fiscal health has worsened in recent years with neither Republicans nor Democrats on Capitol Hill willing to fully address the issue.
“Clearly, we can’t keep going like we have,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a fiscal watchdog group, said in a statement. “Our fiscal path has been running backwards for far too long; it’s time to start working on the path forward.”
The US debt hit a record $40 trillion in August, a grim milestone that will have consequences for Americans, businesses and the government for years to come. Yet the “big, beautiful bill” that President Donald Trump and congressional Republicans enacted last year is expected to add trillions more to the national debt over a decade as its generous tax breaks outweigh the package’s spending cuts.
The nation’s growing financial woes, along with rising corporate debt supply and expectations for higher Federal Reserve interest rates, have sparked turmoil in bond markets in recent months. Investors are increasingly jittery, which has sent rates on US debt soaring. That has also led to higher mortgage rates, making it even more difficult to buy and sell homes.
Big, beautiful bill impact
The Republicans’ sweeping tax cuts are also starting to have an effect. Although many businesses are raking in higher profits, corporate tax revenue declined by 16% to $382 billion.
The “big, beautiful bill” allowed companies to take larger deductions for certain investments, the CBO noted, such as immediately deducting research and development costs and certain types of new buildings, including manufacturing plants.
The drop in corporate tax revenues shows that companies are taking advantage of the law’s provisions, said Chris Towner, policy director at the Committee for a Responsible Federal Budget.
Meanwhile, spending on Social Security and Medicare continued to grow as the nation ages and the programs’ benefit costs increased. Medicaid spending also jumped, spurred by rising healthcare costs. Most of the “big, beautiful bill’s” historic cuts to Medicaid don’t start kicking in until next year.
Lawmakers will likely have another chance to address the nation’s fiscal problems next year, when the US is once again expected to hit the debt ceiling.
The-CNN-Wire
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