The United States has recorded its 25th consecutive fiscal year operating at a budget deficit, with the Treasury Department reporting Friday that the federal government spent nearly $2 trillion more than it collected in revenue during fiscal year 2026. The fiscal year ended September 30, marking another year of deficit spending as Washington continues borrowing to cover the gap.

The deficit reached approximately $1.99 trillion, up from $1.78 trillion in fiscal year 2025. It was the largest annual shortfall since 2021 and the third-largest in American history, according to Treasury Department figures reported by Reuters.

Federal spending reached a record $7.40 trillion, a 6% increase from the previous year, while government revenue totaled a record $5.40 trillion, rising by 3%. Spending therefore grew substantially faster than revenue, widening the gap between what the government collects and what it spends.

One of the biggest pressures on the federal budget is the cost of servicing the national debt. Interest expenses climbed to a record $1.36 trillion during fiscal year 2026, an increase of 12% from the previous year. The national debt surpassed $40 trillion earlier this year, adding to concerns about the long-term cost of continued borrowing.

Spending on major benefit programs, including Social Security and Medicare, also continued to rise. Defense spending increased by $48 billion, reaching approximately $917 billion for the fiscal year. Meanwhile, tariff refunds following a Supreme Court ruling reduced net tariff revenue, further contributing to the shortfall.

The federal government last recorded an annual budget surplus in fiscal year 2001. Since then, spending has consistently exceeded revenue, with deficits becoming a recurring feature of the nation's finances.

The latest figures underscore the challenge facing lawmakers as they weigh spending priorities, tax policy, and the rising cost of borrowing. With the national debt above $40 trillion and interest payments consuming an increasing share of federal resources, reducing the deficit remains a major fiscal challenge for Washington.