Tag: debt

GOP Spending Swells US Deficit to Nearly $2 Trillion for 2026

The Treasury Department released its monthly statement on Friday and has now confirmed what we all suspected: the US federal government, under the Trump Administration, will finish the 2026 fiscal year with an annual fiscal deficit of about $2 trillion.

To be precise, the federal deficit for the 2026 fiscal year, which ended on September 30, is $1.99 trillion. That’s the third largest deficit ever recorded. From fiscal year 2025 to 2026, the deficit grew by 12 percent and that’s the largest growth rate since 2023. Last year, the federal deficit was $1.84 trillion, which was slightly smaller than the 2024 deficit of $1.95 trillion.

Even when adjusted for CPI inflation, however, 2026’s deficit remains the third largest ever, even including the Second World War, when the deficit in 2026 dollars reached an eye-watering $1 trillion.That was considered an off-the-charts deficit at the time. Today, World-War-Two style spending looks quaint compared to Covid-era spending and the past two years of Trump deficits.

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Report confirms: Democrats in ‘total control’ of 5 states with the biggest debts

A new report confirms that Democrats are in “total control” in five U.S. states with the biggest debts, while North Dakota ended up on the other end of the scale, with Republicans in control there, and the state’s $21 billion more than it needed to pay bills.

According to an analysis by the Washington Stand, the Truth in Accounting organization gave the GOP-run North Dakota an “A” grade for having a surplus of $72,300 … per taxpayer.

“While oil, gas, and coal tax revenues declined due to lower energy prices, the decrease was offset by strong investment earnings and federal grant revenue,” the TIA report said.

The report, the 17th annual version of the “Financial State of the States,” assesses the 50 state governments in terms of assets and liabilities.

In North Dakota, Republicans hold the offices of governor, attorney general and secretary of state, and have majorities in both the state House and Senate.

The other end of the scale was occupied by New Jersey, with just $56.8 billion to fund $219.1 billion in outstanding debt, the report said.

“Every New Jersey resident would have to pay $45,800 in taxes to eliminate the deficit. The biggest share of the outstanding debt is in unfunded pension and retiree health care benefits. The former debt is more than $79 billion, while the latter exceeds $91 billion,” the Washington Stand documented.

There are Democrats in all the state’s biggest executive branch jobs, and Democrats in majorities in both legislative chambers.

The Stand confirmed, “Connecticut is the second least healthy state government, according to the TIA report, with every resident having to pay an additional $41,400 in taxes to restore the Nutmeg State’s financial health. Third is Illinois, with a deficit per resident of $36,900, followed by Massachusetts, where $24,100 would have to be paid by each resident, and California at $16,000.”

Democrats are in control of all branches of those governments.

The healthy part of the state population is seconded by Alaska, with a surplus valued at $64,200 per resident. Alaska Republicans occupy the three highest executive branch positions, and the GOP controls the state Senate, but Democrats hold the lower chamber, the report said.

Wyoming is No. 3, with a surplus valued at $30,300, followed by Utah at $14,900 and Tennessee at $11,400. Republicans hold all of the top executive branch positions, as well as control of both chambers of these states’ legislatures.

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Wall Street Expected To Have Its Best Year Ever As Americans Drown In Debt

Money is flooding Wall Street as Americans thirst for financial relief amid war-fueled inflation and soaring household debt.

New York’s securities industry is on pace to blow past last year’s record profits, according to a new report from New York State Comptroller Thomas DiNapoli. Wall Street firms made $45.9 billion in just the first half of 2026, already eclipsing what New York City expected them to make for the entire year. (RELATED: Wall Street Banks Finance Both Sides Of America’s AI Race With China)

The money has poured in as companies race to build artificial intelligence infrastructure, businesses return to the dealmaking table and investors trade through a year marked by war, tariffs and market swings, the Comptroller’s report found. Virtually every major Wall Street revenue stream grew during the first half of the year, with underwriting seeing particularly strong gains.

Wall Street’s boom looks much different from the economy many Americans are living in. Families have rationed showers and hauled water from creeks as water bills climb into the hundreds of dollars, while gasoline prices have risen sharply and record diesel costs threaten to make already expensive grocery bills even worse due to the wars in Iran and Ukraine.

Many Americans are leaning increasingly on borrowed money. Household debt has continued to climb, with consumers carrying growing credit card and auto loan balances as high interest rates make that debt more expensive to service, according to the Federal Reserve Bank of New York.

Credit cards have become a particularly costly pressure point. Americans now owe more than $1 trillion on their cards, Fed data show, while credit card delinquencies have climbed to levels not seen since the aftermath of the Great Recession. Total household debt had climbed to a record $18.8 trillion in the first quarter of 2026.

Meanwhile, billions continue pouring into AI and Wall Street is preparing for another potentially record-breaking payday.

Venture capital investment in AI companies reached $407 billion during the first half of the year, already dwarfing the amount invested throughout 2025, the report found. The spending has helped buoy markets even as investors question whether companies can eventually make enough money to justify the enormous sums flowing into the technology.

Big Tech companies are increasingly borrowing to finance the data centers, chips and power infrastructure behind the AI boom. Amazon, Google, Meta and other tech giants are now competing with governments for investors’ cash as they flood debt markets with new borrowing.

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Trump Says Inflation Will Pay Off The $40 Trillion Debt “Very Rapidly”

President Trump thinks ‘certain levels’ of inflation could take care of the $40 trillion national debt. 

“You know, inflation. Certain levels of inflation will also pay off that debt very rapidly. Very rapidly,” he told TIME in an interview published Thursday, after the outlet pointed out has grown by about $11 trillion over his five years in office. In response, Trump first blamed Joe Biden, then the Fed, then hinted at a plan he wouldn’t share.

“I know I’m the best in the world,” Trump said. “The best – I don’t want to tell you what those means are, but you can pay off the debt through other means. But the one thing that you can do is pay it off through growth, and we’ve never had growth like this.”

Later he circled back, saying “the growth is going to pay off the debt” and that the Fed’s hikes were “hurting our country more than inflation is hurting our country.”

He didn’t say what level of inflation he had in mind, or whether he wants the Fed to tolerate more of it. Earlier in the same interview, though, he blamed Biden for “the biggest inflation in history” and said he “inherited the greatest inflation in history,” adding that “the only thing I have to get down now is the gas.”

Headline CPI rose 3.4% in the 12 months through August, with core at 2.4%, according to the BLS. On Sept. 16 the Fed raised rates for the first time since July 2023 – a unanimous quarter-point hike to 3.75%-4% that included Trump’s own pick for chair, Kevin Warsh – and penciled in another before year-end. Trump told TIME he “probably would have voted against the board” if he were Warsh, and has called for rates of 1% “or less.”

On Thursday, the day TIME published the interview, the 10-year Treasury yield touched 5.34%, its highest since 2002. It closed at 5.24%.

He’s Floated This Before

None of this is new for the self-described “king of debt.” In May 2016 he told CNBC the US could buy back its own bonds at a discount if rates went up. That was widely read as a default threat, so a few days later he went on CNN to walk it back. “You never have to default because you print the money, I hate to tell you, OK?” he said.

A month before that, he told the Washington Post he could wipe out what was then a $19 trillion debt “over a period of eight years” – a debt that has since more than doubled.

Buybacks are back, too. After the debt crossed $40 trillion and long-dated yields kept climbing, Treasury Secretary Scott Bessent tripled the cap on the first expanded buyback to $6 billion. As we noted at the time, yields surged anyway, since $6 billion barely registers against more than $2 trillion in gross issuance a year.

Bessent, for his part, prefers to talk about growth. In June 2025 he told CBS’s Margaret Brennan that “everything has been alarmist” on inflation and that the US would never default. And the day after Treasury reported the $40 trillion milestone, he went on CNBC to say there was “nothing magic” about the number and “we can grow our way out of that.”

The Part He Left Out

Last year we ran a piece arguing Bessent was effectively putting the national debt on an adjustable-rate mortgage by leaning on floating-rate financing, which also projected the debt would top $40 trillion by the end of fiscal 2026 – it got there in mid-August, about six weeks ahead of schedule.

Back in April 2025, Bloomberg’s Simon White made the case that higher inflation and a weaker dollar – where US policy seemed to be headed – were consistent with a falling debt burden. But he warned that unlike Britain’s post-WWII “beautiful deleveraging,” erratic policymaking could wreck trust in the dollar system, spark capital flight and end up adding to the debt.

Nick Giambruno spelled out the mechanics in July: financial repression, where the government keeps interest rates below inflation and the difference quietly moves wealth from savers to the Treasury. With 9% inflation and 4% rates, he noted, that’s a 5% transfer every year, and it compounds.

It has worked before. A 2011 BIS paper estimated negative real rates wiped out debt worth 2-3% of GDP a year in the US and UK between the late 1940s and the 1970s. But that was under Bretton Woods, with interest-rate caps, captive domestic buyers and capital controls – and the paper found financial repression works best “when accompanied by a steady dose of inflation.”

The catch is that it only works if the Treasury can borrow below the inflation rate. Right now it can’t: the 10-year yields nearly two points more than headline CPI, interest on the debt already runs over $1 trillion a year, and everything that matures gets rolled at today’s rates.

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Bessent Tells Japan to Do What Washington Refuses to Do

Treasury Secretary Scott Bessent is now pressuring Japan to rein in government spending and restore credibility with the bond market as Japanese yields surge. Reuters reports that Bessent confronted Japanese officials over what Washington sees as an inconsistent combination of aggressive fiscal spending and monetary policy, warning that instability in Japan’s enormous government bond market could spill directly into U.S. Treasuries. Japan’s 10-year government bond yield has climbed above 3%, reaching levels not seen since 1996, as investors increasingly demand greater compensation to finance one of the most indebted governments in the world.

Bessent understands the problem perfectly when he looks at Japan. Government cannot continue borrowing endlessly, suppress interest rates, manipulate its currency, and assume global capital will sit there forever accepting whatever return politicians decide to offer. Japan has spent decades experimenting with virtually every form of monetary manipulation imaginable. The Bank of Japan pushed rates below zero, bought enormous quantities of government bonds, controlled the yield curve, and expanded its balance sheet until it became one of the dominant holders of Japanese government debt. None of that eliminated the debt because it merely postponed the day when the market would again determine the price.

Japan’s government debt remains above 200% of GDP, and rising yields dramatically change the arithmetic. When rates were near zero, Tokyo could carry an enormous debt load because servicing costs remained artificially suppressed. Once yields rise, refinancing becomes progressively more expensive. The government then must issue still more debt to cover interest expenses, cut spending, raise taxes, or find new buyers willing to finance the entire operation.

What makes Bessent’s warning remarkable is that Washington is confronting the same fundamental problem. The United States has surpassed $40 trillion in federal debt, the Treasury must continuously refinance existing obligations while financing new deficits, and the 10-year Treasury yield has been testing levels around 5%. Bessent has simultaneously expanded Treasury buybacks in an effort officially aimed at improving liquidity while clearly recognizing the political and financial importance of preventing disorder in long-term government debt.

He is therefore telling Japan something Washington desperately needs to hear itself: the bond market eventually demands fiscal credibility. Bessent is especially concerned because Japan does not exist in some isolated financial universe. Japanese institutions are among the world’s largest foreign investors and major holders of U.S. assets, including Treasuries. When Japanese yields were virtually zero, enormous amounts of Japanese capital moved abroad searching for returns. If yields at home become sufficiently attractive, some of that capital has less reason to remain overseas. That is where Japan’s debt crisis can become America’s problem because capital can begin returning home precisely when Washington needs enormous amounts of foreign money to finance its own deficits.

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Democrat Socialist Who Wants to ‘Tax the Rich’ Complains About Paying Her Own Back Taxes and Student Loan Debt

Angie Nixon, the Democratic Socialist running for U.S. Senate in Florida, is not interested in paying her fair share.

The ‘tax the rich’ leftist commented during a podcast appearance this summer that she does not want to pay her back taxes or her student loan debts.

How incredibly typical.

The Washington Free Beacon reports:

Nixon’s personal income in 2025 clocked in at well over five times the median income of the average American worker, yet she failed to set aside enough of her substantial earnings to pay her taxes and repay her student loans. The dues-paying Democratic Socialist reported in her latest disclosure submitted in Florida that, as of Aug. 25, she owes nearly $14,000 in unpaid taxes to the IRS on top of $17,600 in unpaid federal student loans.

Nixon’s unpaid taxes and student loan debts are a drop in the bucket compared with the extraordinary and diversified income she earned in 2025. Still, the Democratic Socialist, who wants to institute a 5 percent annual wealth tax on billionaires, recently complained about how “crazy” it is that the federal government is forcing her to pay her own fair share.

“Your girl over here is on a payment plan to pay the IRS $12,000 back,” Nixon said during a podcast interview in July. “And listen, I ain’t made $105 billion, but you making me pay $12,000 to the feds? Like, really? That’s what we’re doing? And they already took some of the taxes away anyway. I paid over $10,000. It’s just, it is crazy.”…

As for Nixon’s unpaid federal student loan debt, she says she won’t repay it. In October 2023, when Congress ended the pandemic-era student loan moratorium, Nixon, a University of Florida graduate, declared on Facebook she was “above” paying back her educational debts.

“Dear Student Loans. It’s above me now,” Nixon wrote. “I don’t wanna pay it back. Education supposed to be free.”

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The Number That Should Keep Every American Parent Up At Night

Washington’s spending addiction just reached a new record. According to the Congressional Budget Office, the federal deficit for the fiscal year ending on September 30 will hit a stunning $2.1 trillion. This number, confirmed in the CBO’s August monthly budget review, is the highest deficit recorded outside of the years of emergency COVID spending.

The numbers say something that neither political party wants to broadcast. Even with the economy improving, federal spending jumped 5% while revenue only grew 3%. Adding to the structural imbalance, interest on the national debt jumped by 14% compared to the previous year. Spending on defense, Social Security, Medicare, and Medicaid is also up. The government borrowed $431 billion in the month of July alone — an average of $6 billion every single day.

“We’ve borrowed an astounding $1.8 trillion this fiscal year, with $431 billion in the month of July alone, equating to nearly $6 billion per day,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “We’re on track to surpass $2 trillion in borrowing this fiscal year despite not being in a recession. That is not normal.”

The CBO’s original estimate was $1.9 trillion — revised upward by $200 billion largely because the Supreme Court struck down tariff authorities in February, cutting expected revenue by $250 billion. About $100 billion has already been refunded to companies under court orders. Even with new tariffs imposed since, the fiscal math still does not add up.

The Medicaid waiver system shows just how embedded the waste is. Congress baked a budget-neutrality requirement — Section 71118 — into last year’s reconciliation law, requiring that starting January 2027, no Medicaid waiver can be approved without a certification it will not increase federal spending. States have spent years exploiting these waivers to extract billions beyond what their programs justify. A 2014 Government Accountability Office audit found $778 million in excess spending on a single Arkansas Medicaid waiver — money the Obama administration used to bribe the state into expanding Obamacare.

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$40 Trillion in Debt and the Interest Bill Keeps Growing

The United States has crossed $40 trillion in gross federal debt, and Washington will treat it as another unfortunate milestone before returning to the business of spending money it does not have. The more immediate problem is what it costs to carry that debt. Treasury’s figures show approximately $1.17 trillion in gross interest expense through July, just ten months into fiscal year 2026. That works out to roughly $117 billion a month, or $3.85 billion every single day over that period. These are interest costs, not repayments that reduce the principal. Washington incurs this expense while the debt itself continues climbing.

There are two different interest figures, and they should not be confused. Treasury’s gross interest expense includes interest credited to government accounts holding Treasury securities. The federal budget’s net interest measure excludes those internal payments and includes other offsets. The Congressional Budget Office’s February outlook placed net interest at approximately 3.3% of GDP in 2026, implying more than $1 trillion for the full fiscal year. Even on that narrower measure, Washington is devoting roughly one dollar in five of projected federal revenue to interest. The distinction matters for accounting, but neither number describes a government bringing its finances under control.

The issue was never simply that government had borrowed a large sum. It was that borrowing had become a permanent arrangement, with interest added to budgets already running deficits. Politicians take credit for the original spending, while the cost of financing it survives long after they leave office. Their successors inherit the bill and issue more debt rather than confront the promises that created it.

Consider what refinancing actually means. When a Treasury security matures, its holder must be repaid. If Washington finances that redemption by selling another security, the creditor has changed, but the government has not eliminated the obligation. It has renewed it at whatever rate the market will accept. Borrowing to refinance principal is separate from the interest bill, yet both require continued access to willing buyers. This is why a government can make every payment on time while its underlying financial position deteriorates.

The mathematics of higher rates becomes brutal at this scale. Every additional percentage point on $1 trillion of debt means another $10 billion in annual interest once that debt carries the higher rate. Apply that to successive waves of refinancing and the expense builds year after year. The entire $40 trillion does not reset overnight, and it would be misleading to suggest otherwise. Existing fixed-rate securities retain their coupons until maturity. That delay, however, can conceal the developing burden and give politicians another excuse to postpone action.

There is no magic number at which a country automatically collapses. Confidence, borrowing costs, economic growth, and the ability to raise revenue all matter. The danger is that higher interest expenses require more borrowing, while concerns about that borrowing encourage investors to demand still higher yields. A deteriorating fiscal position can then begin reinforcing itself.

CBO projects net interest costs reaching $2.1 trillion in 2036, or 4.6% of GDP. That is a projection under its stated assumptions, not a guaranteed outcome, but it demonstrates that the problem does not disappear even in an orderly baseline. Washington is not merely struggling with a temporary expense left over from an emergency. It is carrying an interest burden expected to grow while elected officials continue making commitments against future revenue.

War makes this arithmetic harder. Military operations require resources today, while the interest on borrowing to finance them can remain for decades. If conflict also raises energy costs or disrupts production, it can complicate the Federal Reserve’s inflation problem. Higher rates may be necessary to restrain inflation, but they also increase the cost of new federal borrowing. Demanding that the Fed cut rates does not repair that conflict, especially when long-term investors remain free to demand compensation for inflation and fiscal risk.

Republicans cannot explain this away by blaming Democratic spending while defending every unfunded commitment of their own. Democrats cannot promise an expanding government without confronting the cost of financing it. Both parties have constituencies they refuse to disappoint and obligations they prefer to leave to the next administration. The interest bill does not recognize party affiliation, and the bond market does not have to accept a campaign promise as repayment.

The $40 trillion figure should therefore be understood through the income required to sustain it. America possesses enormous productive capacity, but that is not permission for Washington to claim an ever-larger portion of future revenue before the public receives any new service. More than a trillion dollars in annual net interest is already a substantial claim on that income. The question is how much further government intends to mortgage the future before admitting that borrowing has become its substitute for governing.

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The $29 Trillion Debt Rollover Nightmare

Governments and corporations are expected to borrow a record $29 trillion from global bond markets in 2026, according to the OECD. That is $4 trillion more than in 2024 and twice the amount borrowed only ten years ago. The financial press will present this as evidence that debt markets remain deep and resilient, but 78% of the borrowing by OECD governments will not finance new roads, productive industry, or economic expansion. It will be used merely to refinance debt that already exists.

This is the Ponzi structure underlying modern government finance. Politicians speak as though debt is repaid, but governments almost never repay the principal. When a bond matures, they issue another bond to obtain the money needed to redeem the first one. They then borrow still more to finance the current deficit and increasingly borrow to pay interest on the debt accumulated by previous administrations. The entire system functions only while investors remain willing to roll the obligations forward.

The $29 trillion figure is annual borrowing, not the total amount of outstanding debt. Sovereign and corporate bond markets combined have already reached approximately $109 trillion. The system must therefore absorb an enormous wave of new securities every year merely to prevent old promises from defaulting. This is why the refinancing cycle matters far more than the political debate over whether a technical default will occur. A government can continue paying every bondholder on time while still entering a debt crisis if refinancing costs rise beyond what its tax base can sustain.

Politicians became addicted to short-term debt because it was cheaper than locking in long-term interest rates. The OECD reports that 30-year yields have risen significantly across most countries since 2022, leading governments and companies to issue more short-maturity debt. This lowers the interest bill temporarily but forces borrowers to return to the market more frequently. They are trading today’s discomfort for tomorrow’s crisis because nobody in government wants to admit the actual cost of decades of fiscal mismanagement.

A nation that finances itself for thirty years is protected from immediate changes in interest rates on that debt. A nation that continually borrows at short maturities must refinance again and again at whatever rate the market demands. When confidence falls, the cost resets quickly across the debt structure. A one-percentage-point increase may appear insignificant to some bureaucrat, but applied to trillions in recurring issuance, it consumes hundreds of billions that must be extracted through higher taxes, reduced services, inflation, or still more borrowing.

Central banks are also reducing their government-bond holdings after years of manipulating rates through quantitative easing. This leaves hedge funds, households, and foreign investors to absorb a growing supply of debt. These buyers are more sensitive to price and are not obligated to rescue politicians from their own stupidity. If the yield does not compensate them for inflation and political risk, they will demand a higher return or move their money elsewhere. Government calls this market instability because it cannot stand the idea that its debt should be priced honestly.

The competition for capital is becoming vicious. Governments need money for welfare states, pensions, military expansion, energy subsidies, industrial policy, and the interest on existing debt. Corporations must refinance their own obligations while funding new investment, and the artificial-intelligence race is adding another enormous borrower to the market. Nine major technology companies are expected to issue approximately $1.2 trillion in bonds between 2026 and 2030 as they pursue a combined $4.1 trillion in capital spending. Every dollar absorbed by government debt is capital that cannot finance productive private investment without pushing rates higher.

War will make this rollover crisis far worse. Governments are expanding defense budgets while rebuilding supply chains, stockpiling strategic resources, subsidizing domestic manufacturing, and attempting to reduce dependence on geopolitical rivals. These expenditures are being added to budgets that were already insolvent before the War Cycle turned higher. They are preparing for a global conflict with borrowed money while the cost of that money is rising.

This is why the Sovereign Debt Crisis will not resemble the 1930s or some dramatic bankruptcy proceeding. Governments that borrow in their own currencies can create the money necessary to make nominal payments, but they cannot create purchasing power. They will repay creditors in depreciated currency, force financial institutions to hold public debt, suppress interest rates below inflation, impose capital controls, and search for new ways to trap private savings inside the system. Default will come through the destruction of the currency and the confiscation of wealth rather than a polite announcement that the Treasury has missed a payment.

The movement toward CBDCs and tokenized bonds must be understood within this context. Governments facing a record refinancing burden will want a financial system capable of identifying capital, controlling its movement, and directing it toward approved assets. They will say digital money improves efficiency and tokenized debt provides instant settlement. What they will never advertise is that the same infrastructure can prevent capital from escaping when investors no longer wish to finance the state voluntarily.

The OECD recommends that governments ensure the “long-term sustainability” of their debt, as if politicians who created this disaster will suddenly discover restraint. They will not cut spending until the bond market forces the issue because every expenditure has a constituency and every reform threatens someone’s election. They will raise taxes, manipulate markets, change accounting rules, and blame speculators long before admitting that government itself has become the greatest threat to financial stability.

The world must absorb $29 trillion in borrowing during 2026 while war expands, rates rise, central banks retreat from bond markets, and private industry competes for the same capital. The system remains functional only because confidence has not yet completely broken. Once investors question whether rolling government debt forward is worth the risk, the refinancing machine will seize. Governments do not have $29 trillion sitting in a vault to repay these obligations. They have only the ability to borrow again, tax the public, or destroy the value of money.

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