US October Budget Deficit Hits Record $404 Billion as Spending Surges and Tariff Revenue Falls

admin · November 13, 2026 · 5 min read

The US Treasury building in Washington with a rising federal deficit chart

The United States opened fiscal 2027 with a record $404 billion budget deficit in October, the Treasury Department said on Thursday, as government spending climbed to a record for the month and receipts fell sharply. The shortfall was $120 billion, or 42 percent, larger than the deficit recorded in October a year earlier.

The figures mark a difficult start to the new fiscal year for Treasury Secretary Scott Bessent, who has set a goal of cutting the deficit to 3 percent of gross domestic product. The Treasury reported a full-year fiscal 2026 deficit of nearly $2 trillion, the largest budget shortfall in five years, equal to an estimated 6.2 percent of GDP, up from 5.8 percent in fiscal 2025.

A record start to the fiscal year

October is the first month of the federal government’s fiscal year, and the $404 billion gap set a record for the month. The result came in close to the Congressional Budget Office’s estimate of $409 billion, published on November 10, landing $5 billion below the budget office’s projection.

The deficit widened on both sides of the ledger. Receipts fell by $35 billion, or 9 percent, to $369 billion, while outlays rose by $84 billion, or 12 percent, to a record $773 billion for October.

Receipts fall as tariff revenue drops

The decline in receipts was driven in part by a sharp fall in customs duty collections. Net customs duties dropped 39 percent to $19.2 billion, from $31.3 billion in October 2025, when tariff revenues were running at unusually high levels after President Donald Trump’s global tariff program took effect.

The drop underlines how volatile tariff income has become as a source of federal revenue. Customs collections had surged over the past year as the administration’s tariffs took hold, but the October comparison shows that the revenue stream is not a stable offset to rising federal spending.

Spending reaches a record $773 billion

On the spending side, the Treasury reported October outlays of $773 billion, a record for the month. The increase reflects the continued growth of the federal government’s largest programs, including Social Security, health care, and interest payments on the national debt, which have all risen as the population ages and borrowing costs remain elevated.

After calendar-related adjustments, the picture was somewhat less stark but still pointed in the same direction. Because benefit payments scheduled for November were shifted into October in both fiscal years, the Treasury said the adjusted deficit would have been $285 billion — still an increase of $94 billion, or 49 percent, from the year-ago period.

Why this matters

The record October deficit matters because it shows the scale of the fiscal challenge facing the administration at the start of its new budget year. A deficit equal to more than 6 percent of GDP in a year without a recession or a war is historically unusual, and it leaves the government with less room to respond to an economic downturn.

It also complicates the administration’s fiscal message. Bessent has argued that faster economic growth and tariff revenue would help bring the deficit down toward 3 percent of GDP. The October numbers show the opposite momentum: revenue falling while spending grows, with the tariff income that was supposed to help close the gap now shrinking on a year-on-year basis.

For financial markets, the figures add to concerns about the scale of Treasury borrowing. A larger deficit means more government debt issuance, which can push up borrowing costs for households and businesses if investors demand higher yields to absorb the extra supply. The Treasury is scheduled to release a more detailed breakdown of the October budget statement later this month.

What comes next

The administration’s next fiscal test comes quickly. The October producer price index, due on Friday morning, will give a fresh read on inflation, and the Treasury’s detailed monthly statement will show which programs drove the October spending increase.

Attention will also turn to whether the deficit narrows in the coming months. October is often a weak month for receipts because relatively few tax payments fall due, so a single month does not set the pattern for the year. But the size of the gap — and the fact that it widened even after adjusting for the calendar — suggests the fiscal 2027 deficit will be difficult to bring down without changes to spending or revenue.

Frequently Asked Questions

How big was the US budget deficit in October 2026?

The federal budget deficit was $404 billion in October 2026, a record for the month and $120 billion, or 42 percent, higher than the $284 billion deficit recorded in October 2025, according to the Treasury Department.

Why did the deficit rise so sharply?

Receipts fell 9 percent to $369 billion, including a 39 percent drop in net customs duty collections to $19.2 billion, while outlays rose 12 percent to a record $773 billion for the month.

What is the Treasury’s deficit target?

Treasury Secretary Scott Bessent has set a goal of reducing the federal deficit to 3 percent of GDP. The fiscal 2026 deficit was estimated at 6.2 percent of GDP.

Does one month determine the full-year deficit?

No. October is typically a weak month for receipts, so the full-year picture will depend on tax collections and spending over the remaining 11 months of fiscal 2027. But the October figures show the deficit widening rather than narrowing at the start of the year.

The October deficit figures leave the administration starting fiscal 2027 with a record gap to close, and the next Treasury statements will show whether the widening is a one-month distortion or the start of a larger fiscal year trend.