US Deficit Hits $1.8 Trillion in 10 Months as National Debt Nears $40 Trillion
The Committee for a Responsible Federal Budget confirmed on August 12, 2026, that the US Treasury ran a $1.8 trillion budget deficit through the first 10 months of fiscal year 2026, with gross national debt on the brink of crossing $40 trillion.
The CRFB's press release, citing Treasury data, frames the shortfall within a fiscal trajectory that has drawn increasing scrutiny from budget hawks and bond market participants. The $1.8 trillion figure covers October 2025 through July 2026, leaving two months of receipts and outflows before the final FY 2026 deficit is locked in. CRFB
The debt milestone has been approaching for months. In December 2025, the Senate Joint Economic Committee reported that the national debt had reached $38.40 trillion, up $2.23 trillion year-over-year — roughly $6.12 billion per day. By March 2026, the Peter G. Peterson Foundation issued a statement on the debt passing $39 trillion, projecting that at the current growth rate, the figure would reach $40 trillion before the fall elections. Peterson Foundation
That projection now appears imminent. Yahoo Finance reported on August 13, 2026, that the US national debt is about to cross $40 trillion, a level no country has ever reached. PBS NewsHour followed with its own examination on August 17, 2026, tracing how the country arrived at this level and laying out the stakes for fiscal policy. Yahoo Finance PBS NewsHour
The trajectory from $38.40 trillion in December 2025 to the cusp of $40 trillion eight months later implies an average accrual rate broadly consistent with the $6.12 billion per day figure the JEC cited for the prior year-over-year period. At that pace, the incremental $1.6 trillion needed to move from $38.40 trillion to $40 trillion would take roughly 261 days, landing in the back half of August 2026.
For fixed-income markets — the arena where investors buy and sell government bonds — the intersection of a $1.8 trillion 10-month deficit and a $40 trillion debt stock sharpens questions about Treasury issuance capacity and the term premium investors demand to hold longer-dated bonds. The deficit captures the flow (how much the government overspends in a given period); the debt captures the stock (the total accumulated amount owed). Together they frame the fiscal backdrop against which the Federal Reserve's monetary policy stance and Treasury's refunding decisions will be assessed in the months ahead.
The broader context here is that deficit and debt levels of this magnitude constrain fiscal optionality. Elevated interest costs compound the trajectory: each additional dollar of debt issued at current coupon levels adds to the interest expenditure line in the federal budget, which in turn feeds back into the deficit. This is the dynamic the CRFB and Peterson Foundation have repeatedly flagged, and it is the mechanism by which a $1.8 trillion deficit can persist even without new discretionary spending.
For savers, the implications are indirect but real. Persistent large deficits tend to put upward pressure on Treasury yields (the interest rate the government pays to borrow) as issuance volume rises. Higher Treasury yields can feed through to mortgage rates, corporate borrowing costs, and the discount rates investors use to value stocks. Whether that transmission materializes in any given quarter depends on the Fed's balance sheet trajectory, foreign demand for Treasuries, and the macroeconomic growth rate relative to debt accrual. None of those variables are settled.
The $40 trillion figure, once crossed, will carry symbolic weight in an election season. The Peterson Foundation's March projection that the debt would reach that level before the fall elections appears to be materializing on schedule. What is unclear is whether the political system responds with meaningful fiscal adjustments or continues on a path where debt service costs grow as a share of federal outlays.
What is known: the Treasury confirmed $1.8 trillion in deficit spending for the first 10 months of FY 2026, the gross national debt is approaching $40 trillion, and the rate of accrual has been consistent with prior-year trends. What is priced in versus what might surprise markets from here depends on the final two months of FY 2026 receipts, the trajectory of net interest costs, and the political response to a debt figure that has no historical precedent among sovereign issuers.
