The US Has Recorded Its 25th Straight Fiscal Year in a Row of Operating at a Deficit
Twenty-five years in the red
The US has recorded its 25th straight fiscal year in a row of operating at a deficit, per CNBC.
Treasury Department figures released Friday put the fiscal 2026 deficit at $1.99 trillion for the year ended September 30, up about 12% from $1.78 trillion in fiscal 2025. It is the largest shortfall in five years and the third-largest annual deficit in American history, behind only the pandemic years of 2020 and 2021.
The streak now runs a quarter century. The last federal surplus was in fiscal 2001, and fiscal 2026 was the first full budget year of President Donald Trump's second term.
Records everywhere, including the interest bill
Both sides of the ledger set records. Receipts hit a record $5.40 trillion, up 3%, but outlays hit a record $7.40 trillion, up 6%. Social Security and Medicare costs kept climbing, and defense spending jumped $48 billion, up 6% to $917 billion.
The fastest-growing line is the debt itself. Debt-service outlays totaled a record $1.36 trillion, up 12%, a category now eclipsed only by Social Security and the combined Medicare and Medicaid programs. Total U.S. debt breached the $40 trillion milestone about two months ago.
Tariffs moved the wrong way, too. A Supreme Court ruling this year negated a large portion of the tariffs imposed under emergency powers, triggering $145 billion in refunds and cutting net tariff income about 11% to roughly $173 billion. The Treasury estimated the deficit at 6.2% of GDP, up from 5.8% the year before.
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Options market and stocks to watch
A $1.99 trillion deficit at 6.2% of GDP, with a hiking Federal Reserve, is a supply story for Treasuries, and supply is what long-duration assets price. TLT and the long end of the curve carry the term-premium risk if auctions start to struggle, and auction tails are becoming the calendar events that matter.
The knock-on trades are familiar: GLD as the debasement hedge, rate-sensitive equities like the homebuilders in XHB if yields push higher, and the big banks in XLF, which earn the float on a steeper curve but wear the mark-to-market on their bond books. Watch Treasury auction results and refunding announcements for the real signal, and follow fiscal headlines on the Unusual Whales news feed.
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