Here's the oddity. Unemployment is low, the expansion is six-plus years old, there's no pandemic and no recession — and the federal government still closed fiscal 2026 on Sept. 30 having spent $1.993 trillion more than it took in, by the Congressional Budget Office's preliminary count. That's 12% more red ink than fiscal 2025 and the most since 2021. Richard Rubin's Page One story puts the frame on it plainly: deficits this size are normally a recession or wartime number. This one didn't need a recession.
The arithmetic is short. Spending was $7.4 trillion, up 6%; revenue $5.4 trillion, up 3%. Budget experts expect the gap to top 6% of GDP once the final GDP figure is in, against 5.8% the year before. A smaller federal workforce, curtailed clean-energy tax breaks and some lapsed healthcare subsidies narrowed it; more immigration-enforcement spending and extended, expanded tax cuts widened it, and tariff revenue fell short of hopes after the Supreme Court ruled the president had overstepped his authority and refunds followed. Corporate tax receipts fell $70 billion, or 16%. One caution from the paper: a student-loan rule change was booked as a one-time $131 billion spending reduction in 2025, which lowers that year's base and muddies the comparison.
The line nobody can vote away
Now the part that matters at home. Net interest topped $1.1 trillion — up $115 billion, or 11%, which works out to more than half of the deficit's increase — and it now eats more than $1 of every $5 collected in taxes. Policymakers, Rubin writes, can't do much about that directly; the two biggest programs, Social Security and Medicare, are popular with voters and outgrowing the rest of the budget, and the president has pledged to block benefit cuts to either. The kicker: this year's jump in Treasury yields, which took the 10-year to 24-year highs, has barely reached these numbers. It bites only as old, cheaper debt matures and is refinanced — on $32 trillion of publicly held debt, now past 100% of GDP. Shai Akabas of the Bipartisan Policy Center calls it "an unsustainable trend."
Lawmakers in both parties complain about deficits, yet neither party is campaigning on cutting them, and both have floated ideas that could add to them. Administration officials say a "fiscal consolidation" plan is coming, aimed at Treasury Secretary Scott Bessent's target of 3% of GDP. If next month's election splits control of Washington, as now looks likely, the record cuts both ways: sometimes a bipartisan deal for restraint, sometimes a trade in which each side backs the other's deficit-widening plans. We'll leave the blame to the people paid to assign it.
Our read
This is Fixed Income (IN02) with a Tax and Retirement (M10) tail, and the planning point is who buys the bonds. A nearly $2 trillion gap plus maturing debt means the Treasury keeps selling paper, and the yield buyers demand sets the 10-year — the rate 30-year mortgages tend to follow and the one that moves the bond fund in your 401(k). The Journal's mortgage story credits inflation, a strong economy and the Fed outlook for this year's rise, not the deficit alone, but the same yield runs through both stories. So keep safe money short: Treasury bills and floating-rate paper reprice within months. The desk's books hold SGOV in 49 and USFR in 14; TLT sits in 4 older books, stance avoid, nothing added.
Second, read the budget as a tax question, not a party question. Popular programs, a pledge against benefit cuts and an interest bill that can't be skipped mean the gap doesn't close itself — and higher taxes are one way it could. That's the case for splitting retirement money across pre-tax, Roth and taxable buckets, so you've a lever whichever way future tax rates go. If your bond sleeve is still the fund you picked years ago — the "safe" one with a duration you've never looked up — check it this month, not next. You don't wait for the ceiling to drip to find out where the bucket is.