The Federal Deficit and Debt

The deficit is the amount by which federal spending exceeds revenue in a single fiscal year. The debt is the total the government has borrowed over time to cover past deficits, minus repayments. In fiscal 2025 the federal government spent about seven trillion dollars and collected about 5.2 trillion, a deficit of roughly 1.8 trillion dollars, close to six percent of the economy. In fiscal 2026 spending rose to about 7.4 trillion dollars and revenue to about 5.4 trillion, for a deficit of nearly 2 trillion, and net interest passed 1.1 trillion. The government last ran a surplus in fiscal 2001.

Debt held by the public, money owed to investors, foreign governments, the Federal Reserve, and others outside the government, passed 30 trillion dollars in 2025, about 100 percent of gross domestic product, a level last reached just after World War II. Gross debt, which adds money one part of the government owes another, chiefly the Social Security trust funds, reached about 40.2 trillion at the end of fiscal 2026. The Congressional Budget Office projects the public debt will reach its highest level in history within a few years and keep climbing, driven by an aging population, rising health costs, tax revenue below spending commitments, and growing interest payments.

Economists disagree about how much debt is too much, but most agree that the current path is unsustainable. Rising interest costs crowd out other spending, and in May 2025 Moody's became the last of the three major agencies to strip the United States of its top AAA credit rating. Republicans generally argue for spending restraint and growth through lower taxes, Democrats for higher taxes on corporations and high earners, and both parties have enacted laws that added to deficits. Proposals for a fiscal commission to recommend a package of changes have repeatedly stalled.