The U.S. Treasury’s borrowing pace showed little sign of easing as the country moved deeper into fiscal year 2026, with the Congressional Budget Office (CBO) reporting that another $1 trillion has already been added to the federal deficit during the first five months of the fiscal year.
According to the CBO’s monthly budget review, updated through February 2026 and released yesterday, the federal government is estimated to have borrowed $308 billion in February alone.
As borrowing continues to rise, so do the costs of servicing that debt. Between October 2025 — the start of fiscal year 2026 — and February, the Treasury paid an additional $31 billion in net interest on public debt compared with the same period a year earlier. Over just five months, the government has already spent $433 billion servicing public debt, which is now approaching $38.9 trillion.
The CBO explained that interest payments increased “because the debt was larger than it was in the first five months of fiscal year 2025 and because of higher long-term interest rates.” The report added: “Declines in short-term interest rates partially mitigated the overall rise in interest payments.”
Even with those staggering numbers, the deficit has slightly improved compared with the same period last year. During the first five months of fiscal year 2025 — from October 2024 through February 2025 — the federal government had borrowed an additional $142 billion more than the current figure.
Still, that marginal improvement is unlikely to calm fiscal watchdogs who have long warned about Washington’s rising debt levels. Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), cautioned that interest payments on the national debt are projected to surpass $1 trillion this year and could exceed $2 trillion annually by 2036.
“This cannot be sustainable,” MacGuineas said. “Our fiscal problems will not solve themselves. We need policymakers to come together, agree to reduce deficits—a 3% deficit-to-GDP target would be a great start—and put our national debt on a downward sustainable path as a share of the economy.”
Economists generally focus less on the total dollar amount of debt and more on the relationship between debt and economic output. Government debt plays a central role in global financial markets, but analysts warn that the key measure is the debt-to-GDP ratio, which compares a nation’s borrowing with the size of its economy. When that balance becomes too distorted, economic growth can slow as more government resources are diverted to paying interest.
Although MacGuineas’ recommendation centers on maintaining a 3% deficit-to-GDP target rather than directly reducing the debt-to-GDP ratio, the proposal would still link federal borrowing more closely to economic performance. In recent years, the deficit-to-GDP level has generally remained between 5% and 6%.
A closer look at the government’s finances during the first five months of fiscal year 2026 shows that the slightly smaller deficit compared with last year was not driven by reduced spending. Instead, federal revenues increased enough to offset higher expenditures.
Collections from customs duties — including revenues generated through tariffs — were more than four times higher than during the same five-month period last year, rising by $109 billion. Some of those duties collected in 2025 will eventually need to be returned to U.S. importers after a U.S. Supreme Court decision on February 20. However, additional tariffs announced by the Oval Office mean the overall revenue shortfall is expected to remain relatively limited.
Government revenues were also boosted by higher collections from individual income taxes and payroll taxes tied to social insurance programs. Combined, those tax revenues increased by $132 billion.
At the same time, federal spending continued to climb. During the first five months of fiscal year 2026, total outlays reached $3.1 trillion — an increase of $64 billion compared with the same period in fiscal year 2025. The largest spending increases came from the government’s three major entitlement programs: Social Security, Medicare, and Medicaid, whose combined outlays rose by $104 billion.
Spending also increased at the Department of Defense and the Department of Veterans Affairs, while several other agencies reduced their outlays. The Department of Agriculture, Department of Homeland Security, and Department of Education all reported lower spending during the period.
The Environmental Protection Agency also recorded a decline in outlays totaling $20 billion. That reduction largely reflects the fact that the agency spent $20 billion during November and December 2024 under a clean energy grant program created by the 2022 reconciliation act.
