US fiscal pressure continues to intensify, and the deficit reached 1.97 trillion US dollars in the first 11 months of fiscal year 26, and debt interest expenses exceeded 1 trillion US dollars

The Zhitong Finance App learned that the US federal government's fiscal deficit continues to be at an all-time high. According to data released by the US Treasury Department on Friday, the US federal budget deficit reached 1.97 trillion US dollars in the first 11 months of the 2026 fiscal year ending the end of August, which is still one of the highest levels in the same period on record. Meanwhile, rising interest rates have pushed interest expenses on government debt to surpass $1 trillion, and the US debt burden is moving in a direction that could set historic records in the next few years.

After adjusting for calendar factors, the deficit for the first 11 months of the fiscal year ending August was 5% lower than the same period in 2025. Looking at August alone, the US federal budget deficit was $166.8 billion. September is the last month of this fiscal year. Due to factors such as corporate income tax payment deadlines, there is usually a fiscal surplus in that month. Looking at both ends of revenue and expenditure, US federal government spending has reached 6.81 trillion US dollars since fiscal year 2026, an increase of 3% over the previous year; revenue is 4.85 trillion US dollars, which is also a 3% increase over 2025 after adjustments. The huge scale of spending means that even as government revenue continues to rise, the fiscal gap remains high.

Currently, one of the prominent pressures facing the US treasury comes from rising interest costs on debt. As US Treasury yields rise, the financing costs paid by the Treasury for its huge debt stock continue to rise. According to the data, in the 11 months up to August, the US federal government's net interest expenses had reached 1 trillion US dollars, surpassing defense and most major categories of federal expenditure, and only lower than social security spending and the US Department of Health and Human Services, which is responsible for health insurance and other projects.

By the end of August, the average interest rate on US tradable treasury bonds had risen to 3.48%, more than 2 percentage points higher than five years ago. However, this figure is likely to continue to rise in the future, because after treasury bonds issued at lower interest rates in the past matured one after another, the US Treasury needed to refinance according to the current higher market interest rate.

Recently, this pressure has further intensified. Market concerns about inflation continue to heat up, while expectations that the Federal Reserve will raise interest rates to contain price pressure drove US Treasury yields to multi-year highs this week. Earlier on Friday, 2-year US Treasury yields rose to 4.66%, while 10-year US Treasury yields hit 4.98%. This means that the US government will not only have to face growing debt principal, but also bear the increasing cost of refinancing. As low-interest debt is gradually replaced by high-interest debt, interest expenses are likely to continue to squeeze fiscal space.

In addition to interest expenses, mandatory expenses such as social security and health insurance continue to drive up federal government spending. As the number of retirees continues to increase, these welfare programs face increasing financial pressure, and the US Congress lacks clear will to cut benefits or increase workers' contributions.

In recent months, tariff refunds have also been a factor in widening the fiscal deficit. In February of this year, the US Supreme Court ruled that most of the tariff increases previously implemented by the Trump administration were illegal. After that, the government needed to refund part of the tariff revenue already levied.

US Treasury Secretary Bessent said earlier that as the Trump administration introduces new import tariff measures in accordance with other laws, he expects most of his previous tariff revenue to eventually recover.

After three consecutive months of falling net customs revenue, the situation improved in August. According to data compiled by Bloomberg, US customs tariff revenue recorded a net inflow of US$12.8 billion in that month.

However, in the longer term, the US debt trajectory is still worrying. The US Congressional Budget Office (CBO) warned in February this year that according to current trends, the ratio of US government debt to gross domestic product (GDP) is expected to exceed 106% by 2030, breaking the historical record set after the end of World War II in 1946.

Meanwhile, an indicator measuring America's public debt balance broke through the $40 trillion mark for the first time in August of this year, further fueling market concerns about US fiscal sustainability.

The US government's potential new spending plan in the future also complicates the prospects for fiscal austerity. Trump previously called for a further increase in defense spending, and recently proposed that if the Republican Party continues to control Congress after the November midterm elections, he plans to issue a check of 5,000 US dollars to every adult American citizen. These policy propositions have further fueled market concerns about Washington's lack of political will to cut its budget deficit. With major expenditure items such as social security, health insurance, defense, and interest on debt all facing upward pressure, the US government's room to reduce the fiscal deficit is being increasingly limited.

However, Bezent still promised to announce a fiscal consolidation plan in the coming weeks or months. He said that the relevant plan is currently being worked out with White House budget director Walter.