The federal budget deficit hit $1.97 trillion for the first 11 months of the fiscal year, one of the highest such figures on record and leaving the debt burden heading within a few years to levels unseen in U.S. history.

For the 11 months through August, the deficit edged down 5% from the same period of 2025, after accounting for calendar-year differences, a Treasury release Friday showed. For the month of August, the gap was $166.8 billion. The final month of the fiscal year, September, is often in surplus thanks to corporate-tax deadlines.

Spending for fiscal 2026 to date totaled $6.81 trillion, up 3%, while revenues were $4.85 trillion, also 3% higher on an adjusted basis from 2025.

Higher debt interest payments — caused in part by rising U.S. Treasury yields — have pressured the budget. The net interest bill for the 11 months through August totaled $1 trillion — exceeding defense and all other major categories except for Social Security and the Department of Health and Human Services, which oversees Medicare.

The average rate on marketable Treasuries climbed to 3.48% as of the end of August, the department’s data show. That’s more than 2 percentage points higher than five years prior, and the figure is set to keep climbing as lower-yielding securities mature and the Treasury must refinance at higher cost.

Rates, Refunds

Escalating concerns about inflation, and Federal Reserve interest-rate hikes to rein it in, have sent yields to the highest levels in years this week. Two-year yields hit as high as 4.66% earlier Friday, while 10-year rates touched 4.98%.

Spending on Social Security and Medicare have also been steadily boosting federal outlays. The so-called entitlement programs are contending with a steady increase in the number of retirees, with Congress loath to either trim benefits or move to increase workers’ contributions.

In recent months, tariff refunds have added to the deficit. That’s in the wake of the Supreme Court’s February ruling that the bulk of President Donald Trump’s tariff hikes to that point were illegal. Treasury Secretary Scott Bessent has said he expects the bulk of the previous customs-duty stream to be restored as the administration rolls out new import levies based on other legislation.

After three straight months of net declines in customs duties, August saw a positive influx of $12.8 billion, according to data compiled by Bloomberg.

The Congressional Budget Office warned in February that U.S. debt as a ratio of gross domestic product was on track to surpass the 106% record set in 1946, just after World War II, by 2030. One gauge of U.S. public debt outstanding surpassed a record $40 trillion last month.

Trump’s calls to ramp up defense spending and a new proposal to send $5,000 checks to every adult U.S. citizen — should Republicans retain control of Congress in the November election — have added to concerns there’s little appetite in Washington for budget tightening.

Bessent has nevertheless pledged to unveil a fiscal consolidation plan in coming weeks or months, which he has said he’s working on with the White House budget director, Russ Vought.

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