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U.S. posts record July budget deficit of $432 billion
Treasury data show a $1.8 trillion fiscal-year deficit with two months remaining
Interest on the public debt continues to be a key driver of the deficit, with the July total up $26 billion from a year earlier. (Pete Kiehart/Bloomberg)
Key Takeaways:
- The U.S. posted a record July budget deficit of $432 billion as federal spending accelerated, Treasury Department data showed.
- The fiscal 2026 deficit reached $1.8 trillion through 10 months, tracking 5% wider than 2025 after calendar adjustments, while interest costs rose.
- With two months remaining in the fiscal year, spending is up 4% and receipts up 3%, while tariff refunds continued to weigh on revenue.
The U.S. posted a record July budget deficit of $432 billion due to an acceleration in federal spending, offering a fresh reminder of the steady increase in public borrowing needs.
With two months left in the fiscal year, the deficit so far for fiscal 2026 totals $1.8 trillion, Treasury Department data showed Aug. 12. After adjusting for calendar-year differences, the gap is tracking 5% wider than in 2025.
The monthly figure, marking the largest July deficit ever, according to data compiled by Bloomberg, was exaggerated by a $76 billion surge in Medicare spending compared with July 2025. Much of that may have been due to calendar differences. After adjusting for those, Medicare outlays were up $11 billion.
Interest on the public debt continues to be a key driver of the deficit, with the July total up $26 billion from a year earlier. For the fiscal year to date, the tally is $1.17 trillion, a 15% increase, due in part to higher Treasury yields.
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Total spending for July was up an adjusted $37 billion from July 2025, while revenue was down an adjusted $12 billion. The decline partly reflected continuing tariff refunds, a byproduct of the Supreme Court’s invalidation earlier this year of much of President Donald Trump’s tariff increases.
For the first 10 months of fiscal 2026, spending was up an adjusted 4%, while receipts rose an adjusted 3%.
