\n The federal budget deficit rose to nearly $2 trillion for the past fiscal year, which ended September 30, the Treasury Department reported Friday.\n <\/p>\n
\n It was the largest annual deficit since 2021, during the height of the pandemic, when the federal government doled out support to keep the economy and Americans afloat.\n <\/p>\n
\n This past fiscal year\u2019s deficit was 12% higher than the prior year\u2019s $1.78 trillion gap.\n <\/p>\n
\n Net interest payments on the public debt topped $1 trillion for the first time, driven up in part by the nation\u2019s skyrocketing debt levels and higher interest rates. The United States spent more on interest than on any category other than Social Security and Medicare.\n <\/p>\n
\n The deficit also grew because the Trump administration had to issue refunds after the Supreme Court found that certain global tariffs it imposed violated federal law<\/a>. The Treasury Department estimates that about $145 billion in tariff refunds was issued in the last fiscal year.\n <\/p>\n \n Although the economy is in relatively good shape, the nation\u2019s fiscal health has worsened in recent years with neither Republicans nor Democrats on Capitol Hill willing to fully address the issue.\n <\/p>\n \n \u201cToday\u2019s deficit figures cap off a remarkably dismal year for our fiscal health,\u201d Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement. \u201cFiscal discipline requires finding something both achievable and aggressive \u2026 Tough choices will be needed to get there, and we\u2019re running out of time to make them.\u201d\n <\/p>\n \n The US debt hit a record $40 trillion<\/a> in August, a grim milestone that will have consequences for Americans, businesses and the government for years to come. Yet the \u201cbig, beautiful bill\u201d that President Donald Trump and congressional Republicans enacted last year is expected to add trillions more to the national debt over a decade as its generous tax breaks outweigh the package\u2019s spending cuts.\n <\/p>\n \n The nation\u2019s growing financial woes, along with rising corporate debt supply and expectations for higher Federal Reserve interest rates, have sparked turmoil in bond markets<\/a> in recent months. Investors are increasingly jittery, which has sent rates on US debt soaring: The yield on the 10-year Treasury note recently hit its highest level since 2002. That has also led to higher mortgage rates,<\/a> making it even more difficult to buy and sell homes.\n <\/p>\n \n With rising deficits, the government has to issue more bonds to fund its spending. Yields on bonds have soared this year as investors demand more compensation to hold US debt. That raises the government\u2019s cost of borrowing, exacerbating concerns about the mounting debt burden.\n <\/p>\n \n The average weighted interest rate of the debt outstanding was 3.53% at the end of the fiscal year, up from 3.36% at the end of the prior fiscal year, according to the Treasury Department.\n <\/p>\n \n Meanwhile, the deficit as a share the nation\u2019s economy was more than 6% in the last fiscal year, according to Treasury\u2019s rough estimate. That\u2019s more than twice Treasury Secretary Scott Bessent\u2019s goal.\n <\/p>\n \n The Republicans\u2019 sweeping tax cuts are also starting to have an effect. Although many businesses are raking in higher profits, gross corporate tax revenue declined by $43 billion, or 9%.\n <\/p>\n \n The \u201cbig, beautiful bill\u201d allowed companies to take larger deductions for certain investments. Most of the \u201cbig, beautiful bill\u2019s\u201d historic cuts \u2013 notably to Medicaid \u2013 don\u2019t start kicking in until next year.\n <\/p>\n \n At the same time, Social Security benefits are becoming more costly as the nation ages, which also contributed to the widening gap between revenue and spending.\n <\/p>\n