U.S. Federal Deficit Hits $404 Billion in October

The federal government of the United States began fiscal year 2027 with a deficit of $404 billion in October, a significant increase from the $284 billion deficit recorded in October 2025. Total spending for the month reached $773 billion, while tax and duty revenues covered only $369 billion. This follows fiscal year 2026, which ended with a deficit of approximately $2 trillion, marking the worst non-pandemic year on record.

Spending increases were driven by several agencies, including the Defense Department, which spent $124 billion, the Agriculture Department at $31.1 billion, and Homeland Security at $9.1 billion. Interest payments on the national debt also rose to $115.5 billion for the month. For the full 2026 fiscal year, the total deficit reached 6.2% of GDP, with $1.14 trillion spent on interest on public debt.

To manage this debt, Treasury Secretary Scott Bessent implemented a strategy known as a Treasury twist, issuing short-term debt to buy back more expensive long-term debt. While some analysts compared this approach to paying a mortgage with a credit card, recent Federal Reserve inflation rhetoric and an AI market rout have since lowered longer-dated yields.