The Treasury reported a $1.99 trillion federal deficit for fiscal year 2026, the third-largest on record and a 12 percent increase from the prior year, marking the 25th consecutive annual deficit.

Interest payments on the more than $40 trillion national debt reached about $1.3 trillion, while entitlement spending remains the largest category and the administration has called for a 50 percent rise in defense outlays to $1.5 trillion.

The article argues that continued mega-deficits, combined with calls for higher defense spending and monetary accommodation, point toward further debt accumulation and reliance on inflation to manage the real burden rather than fiscal restraint.

The Treasury Department released its monthly statement on Friday and has now confirmed what we all suspected: the US federal government, under the Trump Administration, will finish the 2026 fiscal year with an annual fiscal deficit of about $2 trillion. 

To be precise, the federal deficit for the 2026 fiscal year, which ended on September 30, is $1.99 trillion. That’s the third largest deficit ever recorded. From fiscal year 2025 to 2026, the deficit grew by 12 percent and that’s the largest growth rate since 2023. Last year, the federal deficit was $1.84 trillion, which was slightly smaller than the 2024 deficit of $1.95 trillion.  

Even when adjusted for CPI inflation, however, 2026’s deficit remains the third largest ever, even including the Second World War, when the deficit in 2026 dollars reached an eye-watering $1 trillion.That was considered an off-the-charts deficit at the time. Today, World-War-Two style spending looks quaint compared to Covid-era spending and the past two years of Trump deficits. 

Moreover, 2026 is the 25th annual deficit in a row, with the last federal surplus having been recorded during the 2001 fiscal year (measured in nominal dollars.) The US federal government now appears locked in to perennial mega-deficits exceeded only by the runaway spending of the Covid lockdowns when the federal government embarked on an unprecedented effort to spend out........

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