- The U.S. budget deficit for fiscal year 2026 is on track to reach $2 trillion, the third-largest in history.
- A record $29.5 billion in August tariff revenue was overwhelmed by $689 billion in monthly government spending.
- Interest payments on the national debt surged 44 percent to a record $133 billion in May.
- Mandatory spending on Social Security, Medicare, and healthcare now consumes two-thirds of the federal budget.
- The national debt is approaching $40 trillion, with no signs of slowing its unsustainable growth trajectory.
The U.S. government recorded a $293 billion budget deficit in May, a 7 percent decrease from a year ago, but that improvement is largely a mirage. On a calendar-adjusted basis, accounting for benefit payments shifted between months, the deficit actually rose $71 billion, or 32 percent, year over year. The Treasury Department reported on June 10 that federal outlays fell roughly 9 percent year over year to about $628 billion, while tax receipts slipped 10 percent to $335 billion. But the most striking figure came from customs duties, which turned into a net outflow of $42 million for the month.
The reversal in customs revenue came after the U.S. Customs and Border Protection refund portal opened, allowing companies and individuals to submit tariff refund applications following the Supreme Court's February ruling that President Donald Trump's sweeping global tariffs were illegal. Nearly $22 billion in refunds went out the door in May, slightly exceeding the $21.93 billion in gross customs collections for the month. A year earlier, net customs receipts totaled $22.17 billion, reflecting the first month of Trump's global tariffs imposed under the International Emergency Economic Powers Act. The U.S. Court of International Trade had ordered Customs and Border Protection to establish the refund system following the Supreme Court's decision.
A $2 trillion annual deficit
The United States is on track to post a $2 trillion budget deficit this fiscal year, exacerbating the national debt. Both the Treasury Department and bond market participants project a shortfall of roughly $2 trillion, which would rank as the third-largest in U.S. history behind only the pandemic-era deficits of $3.1 trillion and $2.8 trillion.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a June 10 statement: "Another month's budget results means yet another reminder of just how routine our unsustainable borrowing has become."
She added, "Month after month these numbers are published, and each time it should force us to recognize our unsustainable fiscal trajectory." The national debt will likely top $40 trillion before the year's end, according to Treasury data.
Through the first eight months of fiscal year 2026, the cumulative deficit stood at $1.25 trillion — down 9 percent on an unadjusted basis, but only about 2 percent lower once calendar adjustments are applied. Full-year receipts through that period hit a record $3.656 trillion, while outlays reached a record $4.902 trillion.
Interest payments hit record levels
Debt service costs were a major driver of May's spending, with gross interest payments surging 44 percent to a record $133 billion — up $40 billion from the same month last year. A Treasury official attributed the increase primarily to the growing volume of debt outstanding rather than rising rates, though the average interest rate on U.S. debt did edge up to 3.35 percent from 3.29 percent a year earlier.
Social Security remained the top budgetary item at $140 billion, followed by Medicare at $87 billion, healthcare at $82 billion, and defense at $73 billion. Mandatory spending already accounts for approximately two-thirds of the budget, with Social Security and Medicare representing a sizable share of annual outlays. The Congressional Budget Office estimated that increases in spending on these programs and interest will push outlays to $11.4 trillion, or more than 24 percent of gross domestic product, in 2036.
The Social Security Board of Trustees released its annual report showing the combined reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are projected to cover all scheduled benefits through 2034. However, the OASI Trust Fund is expected to be depleted in the fourth quarter of 2032, at which point incoming payroll taxes will be sufficient to pay about 78 percent of scheduled benefits.
Customs receipts had become a significant source of monthly Treasury revenue over the past year, reaching a peak of $31.3 billion in October 2025. The Trump administration is now proposing to rebuild broad tariffs under different legal authorities in an effort to restore that revenue stream. What is not in dispute is the broader fiscal trajectory: with interest costs at record highs, entitlement programs consuming two-thirds of the budget, and the national debt approaching $40 trillion, Washington's borrowing path shows no signs of bending.
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