Markets 
The federal government is projected to run a budget deficit of at least $2 trillion this fiscal year, according to an estimate by the Treasury Department and bond market participants.
Earlier this month, the Treasury released its quarterly refunding documents for the second quarter of the calendar year, which included estimates of needed borrowing over the next two quarters of fiscal year 2026 as of April.
It showed that the White House is anticipating a roughly $2.1 trillion deficit in FY2026 based on the president’s budget, while participants in the bond market expect the deficit to be about $2 trillion.
Both figures are up from the estimate of more than $1.8 trillion that was produced by the nonpartisan Congressional Budget Office (CBO) in February based on legislation passed by Congress as of mid-January. The U.S. ran a deficit of just over $1.8 trillion in the last fiscal year.
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“Both the Treasury and the markets agree we’re on course to borrow $2 trillion this year, up from the $1.8 trillion deficit we logged last year. $2 trillion deficits used to be unheard of, and then they only occurred during major recessions – it’s beyond scary that $2 trillion deficits are now the norm,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget (CRFB).
A federal deficit of $2 trillion or more in fiscal year 2026 would rank as one of the largest in U.S. history, coming in at third on the all-time list.
The two largest budget deficits in U.S. history were both incurred during the COVID-19 pandemic, with the biggest totaling $3.1 trillion in fiscal year 2020 and the next-largest reaching nearly $2.8 trillion the following year amid a surge of stimulus spending to support the economy.
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MacGuineas said that the latest deficit projection is “yet another data point – along with debt passing 100% of the economy in March and interest spending on track to top more than $1 trillion this year – showing the need for us to get our fiscal situation under control.”
“Markets will only tolerate our unsustainable borrowing for so long; the risk of fiscal crisis gets higher as the days pass. We need deficit reduction urgently,” she added.
US DEBT SET TO CRUSH WORLD WAR II RECORD AS ANNUAL DEFICITS EXPLODE TO $3T WITHIN DECADE
Data from the Commerce Department’s Bureau of Economic Analysis showed that the U.S. national debt surpassed the size of the economy in April for the first time since the World War II era.
The highest recorded ratio of public debt to GDP was recorded in 1946, when it reached 106% of GDP as the U.S. was in the process of demobilization after the end of the war.
The CBO estimated earlier this year that the U.S. will break that record in 2030, with it expected to rise to 108% that year.
Federal debt has surged in recent years amid rising spending on entitlement programs such as Social Security and Medicare as America’s population ages, as well as mounting interest costs incurred amid a growing debt and elevated interest rates.
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