$2 trillion deficits used to be reserved for once-in-a-generation crises. Now they're the baseline.
Both the Treasury Department and bond market participants are projecting the federal government will run a deficit of at least $2 trillion in fiscal year 2026, with the White House budget penciling it in even higher at around $2.1 trillion.
The number puts FY2026 on track to be the third-biggest deficit in American history.
The only two years that beat $2 trillion both happened during COVID - $3.1 trillion in FY2020 and roughly $2.8 trillion in FY2021, when the government was spending heavily to keep the economy alive.
This year, there's no pandemic and no Great Recession. There's just normal spending plus a debt that keeps getting more expensive to service.
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, put it plainly: "$2 trillion deficits used to be unheard of, and then they only occurred during major recessions - it's beyond scary that $2 trillion deficits are now the norm."
For context, the previous projection from the Congressional Budget Office in February pegged the deficit closer to $1.8 trillion, and that number was already considered a problem. The new estimates from the Treasury and bond market both come in higher than that.
Three things keep stacking up.
Interest costs on existing debt are on track to top $1 trillion this year - more than the U.S. spends on defense - as higher interest rates over the last few years made the bill bigger fast. Every new dollar of debt is now financed at rates that didn't exist a few years ago.
Then there's Social Security and Medicare, which have grown steadily as the population ages and neither program was designed to shrink. Spending automatically rises every year the U.S. gets older.
And finally, the math problem at the top of the pile. U.S. national debt passed 100% of GDP in April, the first time since World War II, and the CBO expects the country to break the all-time record of 106% by 2030.
That number isn't theoretical. It's the share of the economy already owed to bondholders.
MacGuineas had one more warning worth quoting: "Markets will only tolerate our unsustainable borrowing for so long; the risk of fiscal crisis gets higher as the days pass. We need deficit reduction urgently."
Bond markets have been patient. They won't be patient forever.
What "running out of patience" looks like is a story for another day - but it usually starts with bond yields rising faster than the government can absorb, which makes the next $1 trillion of debt even more expensive than the last one.
