US Budget Deficit Explodes: Worst October On Record On Historic Surge In Defense Spending; 28% Of All Taxes Go To Pay Interest

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US Budget Deficit Explodes: Worst October On Record On Historic Surge In Defense Spending; 28% Of All Taxes Go To Pay Interest September was not a terrible month for the US budget…

September was not a terrible month for the US budget deficit; well it wasn't great either, but at just a deficit of $27 billion in the last month of fiscal 2026, at a time when the US traditionally burns through 9 cash digits every month, it was relatively forgettable.

One can't say the same thing for October - the first month of fiscal 2027 - when all hell fiscal broke loose.

Let's start at the top: at 2pm today the US Treasury published the latest, October, monthly budget deficit data, which was also the first month of fiscal 2026.

It was, in a word, a shitshow. Total US receipts for the month were $369 billion, a blistering 8.8% drop from the $404 billion a year ago, with individual income taxes accounting for just $186 billion, or about half of the total, and the bulk of the balance coming from Social Insurance and Retirement receipts of $131 billion.

What was especially concerning, is that government receipts have tumbled from a double digit growth pace for much of the post-covid period to just 1.1% on a trailing 12 month YoY basis. This matters because virtually every time TTM spending has turned negative, the US was already in or about to enter a recession.

If receipts (i.e., taxes) were bad, then spending was an absolute debacle. In October, total outlays were $773 billion, a 12% deterioration from the $688.7 billion spent a year ago. On a trailing 6 month basis, the number was $649 billion, the highest on record outside of the covid meltdown, and even with covid, it will only take another $50 billion increase in spending to hit a new record high number.

Putting receipts and spending in context, a chart of the trailing 6 months of government revenue and spending shows that the two trendlines continue to diverge with spending on pace to surpass the covid all time high, even as government revenue remains largely unchanged over the past 5 years!

The difference between the two, is of course, the US budget deficit, which in October was shockingly massive $404 billion…

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