US starts 2027 fiscal year with record October budget deficit of $404 billion

The US government started the 2027 fiscal year with a $404 billion budget deficit for October, a record for the month and an increase of $120 billion or 42% from the year-earlier period, as receipts shrank and outlays ‌grew sharply, the Treasury Department said on Thursday. The record October deficit marks another fiscal setback for Treasury Secretary Scott ‌Bessent after the Treasury reported a full-year fiscal 2026 deficit of nearly $2 trillion, marking the largest budget shortfall in five years.

Bessent has set a goal to reduce the deficit to 3% of US GDP, but the 2026 budget gap was estimated at 6.2% of GDP, up from 5.8% for fiscal ⁠2025. October 2026 ​receipts fell by $35 billion, ⁠or 9%, to $369 billion, due partly to a 39% drop in net customs collections to $19.2 billion from $31.3 billion in October 2025, when President Donald Trump's ⁠global tariff revenues reached their peak.

October individual non-withheld tax receipts fell by $29 billion, or 36%, to $51 billion from the year ago period, when they ​were swelled by tax payments after the expiration of delayed filing deadlines for Californians affected by wildfires in early ⁠2025. After calendar-related adjustments made because benefit payments for November were shifted into October for both fiscal years, the Treasury said the adjusted deficit would have been $285 ⁠billion, ​an increase of $94 billion, or 49%, from the year-ago period.

FARM, MILITARY, INTEREST OUTLAYS But the reported October outlays came to a record for that month of $773 billion, up $84 billion, or 12%, from year-ago levels. The outlay increases were driven in ⁠part by a $14 billion, or 80%, increase in US Department of Agriculture spending due to farm relief payments and a $28 billion, ⁠or 30%, increase in military spending, ⁠representing an October payment to military trust funds that was delayed by last year's government shutdown, along with increases spread across operations, maintenance and procurement.

Gross interest on the federal debt also ‌rose $11 billion, or 11%, ‌from the previous October to $115 billion.