The US federal deficit is expected to reach $2.1 trillion at the end of fiscal year 2026 on September 30, according to forecasts by the Congressional Budget Office (CBO) in its monthly budget review. The deficit—meaning the difference between government spending and revenue from taxes and other sources—has never exceeded $1.8 trillion, with the exception of the Covid-19 pandemic period. The new estimate reflects the magnitude of the fiscal slippage: the US is heading toward borrowing over $2 trillion without being in a recession.
Revenues rise, but spending rises faster
Federal tax revenues are up by 3% in 2026 compared to the previous year. Although revenues from corporate taxation have declined, collections from income taxes and payroll taxes have increased. However, revenue growth is not sufficient. According to the CBO, federal spending has increased by 5%, with the cost of servicing the massive national debt representing one of the greatest fiscal threats. Interest payments on the national debt rose by 14% compared to last year. At the same time, increased costs are also recorded in key sectors of the American state, such as Social Security, Medicare, Medicaid, and defense.
From 1.9 trillion to 2.1 trillion – Trump's tariffs and the revenue hole
The CBO had initially predicted that this year's budget deficit would settle at $1.9 trillion. The estimate was revised upward, mainly due to lower-than-expected tariff revenues following the decision of the Supreme Court to strike down tariffs that had been imposed by President Donald Trump in February. Although Trump subsequently imposed new tariffs, the CBO still estimates that federal revenues will be $250 billion lower than originally forecast. To date, approximately $100 billion has been refunded to companies under an order from the U.S. Court of International Trade.
"We are borrowing almost $6 billion a day"
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, described the situation in dramatic terms. "We have borrowed an astonishing $1.8 trillion this fiscal year, with $431 billion in July alone—an amount corresponding to almost $6 billion a day," she stated. As she highlighted, the US economy is on track to exceed $2 trillion in new borrowing within the current fiscal year, despite the fact that the economy is not in a recession. "This is not normal," she characteristically emphasized.
US debt may become mathematically impossible to repay
The problem, however, is not limited to this year's deficit. The University of Pennsylvania recently estimated that, under current policy, it is likely to become mathematically impossible for the US to repay its national debt by 2048. And that specific estimate was made before Donald Trump asked Congress for a 19% increase in discretionary spending for the coming year. If approved, it would mark the second-largest spending increase in at least the last 60 years.
The inflation crisis and political inertia
The cost-of-living crisis currently constitutes the dominant political problem in the US. Nevertheless, according to the report, neither major political party has made a substantial commitment to reducing government deficits. And that is where the biggest problem for the American economy lies. As long as Washington continues borrowing at record rates while interest costs and government spending simultaneously rise, the fiscal crisis shows no signs of receding. On the contrary, America appears to be heading into a vicious cycle of national debt, deficits, and new borrowing from which exit will become increasingly difficult.
www.bankingnews.gr
Σχόλια αναγνωστών