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The United States federal budget deficit swelled to $432 billion in July, its highest monthly total since March 2021, as government spending climbed to a record while tax revenues slipped, according to Treasury Department data released Wednesday.
The gap widened 48% from the $291 billion deficit recorded in July 2025, underscoring the pace at which federal spending has been outstripping receipts this fiscal year.
Federal expenditures rose 22% year-on-year to a record $766 billion in July, while revenues declined 1% to $334 billion, the data showed.
A portion of the increase stemmed from a calendar quirk: roughly $99 billion in benefit payments originally due in August were instead disbursed in July. Once that timing shift is stripped out, the adjusted deficit for the month was $333 billion, still up 18% from a year earlier.
Medicare spending was a significant contributor, climbing 66% to $192 billion. That increase narrowed to 9% once the calendar adjustment was factored in.
Interest payments on the public debt rose 28% from a year earlier to $118 billion in July, remaining among the principal drivers of the increase in federal spending. Rising debt-servicing costs have been a persistent theme in US fiscal accounts as the total stock of outstanding government debt has grown.
Customs refunds also swelled sharply, reaching $33 billion in July compared with just $1 billion a year earlier. That figure exceeded the $25 billion in gross customs duties collected during the same month.
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For the first 10 months of fiscal year 2026, which began in October, the cumulative federal deficit reached nearly $1.8 trillion, a 10% increase from $1.63 trillion over the same period last year. After adjusting for calendar effects, the year-to-date shortfall was up 5%.
That total has already exceeded the roughly $1.78 trillion deficit recorded for the entirety of fiscal year 2025, with two months still remaining in the current fiscal year.
Federal spending for the October-to-July period rose 5% to $6.28 trillion, while receipts increased 3% to $4.49 trillion. Interest payments on the public debt over those 10 months totaled $1.17 trillion, up 15% from just over $1 trillion during the same period a year earlier.
The US federal fiscal year runs from October 1 to September 30, meaning the current reporting period will close at the end of September.
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