Fiscal 2026 deficit hits $1.97 trillion through August, already past last year's full shortfall
The U.S. Treasury on Friday, September 11, 2026, reported a $1.97 trillion deficit through August, already larger than fiscal 2025’s full-year shortfall.
The United States has already borrowed more in 11 months of fiscal 2026 than it did in all of fiscal 2025. Treasury’s Friday statement put receipts at $4.85 trillion and outlays at $6.81 trillion through August 31, a deficit of $1.97 trillion. The same accounts recorded a $1.775 trillion shortfall for the whole of fiscal 2025. With September still open, this year is $190 billion larger.
August itself printed $166.8 billion, $178 billion, or 52%, below the $344.8 billion gap in August 2025. That comparison is not a tighter budget. Because August 1 fell on a Saturday, military pay, veterans benefits, Supplemental Security Income, and certain Medicare payments that would have posted in August were booked in July, the Treasury said. August Medicare outlays were $25 billion, against $174 billion in July, when those August 1 payments landed. Last August was the mirror image: Labor Day 2025 had pulled September payments forward into that month.
The Committee for a Responsible Federal Budget, working from Congressional Budget Office figures published Wednesday, said that once those calendar effects are removed the August 2026 deficit would have been $267 billion, $10 billion larger than a timing-adjusted August 2025. CBO’s September 9 review had estimated an 11-month deficit of $2.0 trillion, $6 billion less than the same stretch of fiscal 2025, and said the comparison would have been $82 billion larger without payment-timing shifts. Treasury’s Friday totals sit just under that CBO round.
September can still change the year. Last September produced a $198 billion surplus, on receipts of $544 billion, the usual mid-month corporate and non-withheld tax date. Treasury’s August 5 refunding statement said it expected to cut shorter-dated bill auction sizes in September for that reason. The fiscal year ends September 30.
Interest has passed Medicare and defense
Net interest on the public debt cost $1.017 trillion through August 31, more than Medicare’s $979 billion and more than national defense’s $876 billion. Only Social Security, at $1.526 trillion, was larger. A straight 11-month run rate on the interest bill is about $1.11 trillion.
Treasury’s published average rate on marketable debt was 3.475% as of August 31. As of July 29, half the privately held book was scheduled to mature or reset within 26.9 months. That refinancing is meeting a 10-year yield of 4.98% and a 30-year yield of 5.36% as of 2:47 p.m. Eastern Friday.
Par yields climb from 3.91% at one month to 5.37% at 30 years
The 10-year, up 3 basis points on the day, traded as high as 4.985%, the top of the past year. Those yields were already moving before 2 p.m. on this week’s inflation reports and on next week’s Federal Reserve meeting.
Receipts rose. Customs barely did.
August receipts were $360 billion, about $16 billion above a year earlier. CRFB said the gain was in individual income and payroll taxes and was “somewhat offset” by a decline in customs duties, “mostly due to tariff refunds.” Treasury’s statement does not break out a refund subtotal, so the exact August refund amount is not in the official tables.
What the statement does show is the net. Customs duties were $13 billion in August, after July’s net customs line of -$9 billion. For the fiscal year through August they were $167.3 billion, only $2.1 billion, or 1.3%, above the same 11 months of fiscal 2025. After a year of tariff actions, that is the collections record: a near-wash once refunds are in the net.
CBO’s last full-year mark, dated August 10, is a fiscal-2026 deficit of $2.1 trillion, $200 billion above the $1.9 trillion it published in February. The September 9 review did not replace that projection. In the July review that produced the $2.1 trillion mark, CBO said revenues were about $200 billion below the February projections, mostly because of smaller tariff collections after the Supreme Court, on February 20, ruled the administration could not impose tariffs under the International Emergency Economic Powers Act.
Long Treasurys are down 1.6% on the week
The iShares fund of Treasurys due in 20 years or more, TLT, was at $80.88 as of 2:47 p.m. Eastern Friday, up 0.12% on the session, still 0.3% above its 52-week low of $80.67. The iShares 7-to-10-year fund, IEF, and the 1-to-3-year fund, SHY, were both printing the lows of the past year. The State Street fund of one- to three-month bills, BIL, was unchanged at $91.49.
The week is the position. From last Friday’s close through 2:47 p.m., TLT was down 1.6% and IEF 1.3%. SHY was down 0.4%. BIL was flat. On a total-return basis, year to date TLT is down 4.7%, IEF down 2.8%, SHY up 0.6%, and BIL up 2.5%.
Friday’s prices as of 2:47 p.m. Eastern; week change versus the September 4 close; year-to-date total return through Friday.
Coupon sizes are unchanged. Buybacks are not.
The statement does not reset auction sizes. On August 5, Treasury offered $125 billion of notes and bonds to refund $96.3 billion of privately held maturities, raising $28.7 billion of new cash, and laid out coupon and floating-rate sizes for the August-to-October quarter without an increase. The next quarterly refunding is November 4. Until then, any extra borrowing need implied by a $1.97 trillion 11-month deficit is not a larger 10-year or 30-year auction in the official calendar. This week’s 3-year, 10-year, and 30-year auctions settle Tuesday, September 15, the first day of the Fed’s two-day meeting; a 20-year bond is scheduled to auction the same day.
What Treasury has already changed is the other side of the long end. On August 19 it said liquidity-support buybacks in the 10-to-20-year and 20-to-30-year sectors would rise from a $2 billion maximum per operation to at least $4 billion, effective September 9 through November 4. That is more demand for off-the-run long bonds, not more supply of new ones.
Frequently asked
Why was August's monthly deficit so much smaller than last August's?
Because August 1 fell on a Saturday, military pay, veterans benefits, Supplemental Security Income and certain Medicare payments were booked in July instead, and last August had the mirror-image effect from Labor Day.
Is interest now the government's biggest expense?
No, Social Security is larger, but net interest through August cost more than Medicare and more than national defense.
Did tariffs raise much money?
Customs duties for the fiscal year through August were only 1.3% above the same 11 months a year earlier, a near-wash once refunds are netted in.
Is Treasury selling more long bonds to cover the gap?
No, the August refunding left coupon and floating-rate sizes unchanged through October, and Treasury instead doubled the size limit on long-end buybacks.