U.S. Opens Fiscal 2027 With Record $404 Billion October Deficit

By Sarah Collins | November 13, 2026

The United States government began fiscal year 2027 with a record October budget deficit of 404 billion dollars, the Treasury Department said on Thursday, November 12. The shortfall was 120 billion dollars, or 42 percent, higher than in the same month a year earlier, as tax receipts fell and federal spending rose sharply.

October is the first month of the federal fiscal year, and the figures set a difficult tone for the year ahead. The record monthly deficit follows a full fiscal 2026 shortfall of nearly 2 trillion dollars, the largest budget gap in five years. Treasury Secretary Scott Bessent has set a goal of reducing the deficit to 3 percent of gross domestic product.

## Falling Receipts and a Sharp Drop in Customs Duties

The Treasury's monthly statement showed receipts of 369 billion dollars in October, down 35 billion dollars, or 9 percent, from a year earlier. Spending reached a record 773 billion dollars for the month, up 84 billion dollars, or 12 percent, from October 2025. The gap between what the government took in and what it spent widened on both sides of the ledger at once.

The decline in receipts was driven in part by a steep fall in customs collections. Net customs duties dropped 39 percent to 19.2 billion dollars, down from 31.3 billion dollars in October 2025, according to the Treasury figures reported by Reuters. Individual income taxes, which accounted for about half of total receipts at 186 billion dollars, also failed to keep pace with the prior year.

The Congressional Budget Office had estimated the October deficit at 409 billion dollars in a report published on November 10, so the Treasury's official figure of 404 billion dollars came in 5 billion dollars below that forecast. Part of the headline figure reflects a calendar quirk: because November 1 fell on a weekend, benefit payments that would normally have been made in November were shifted into October, and the same shift happened in both fiscal years.

## Spending Surged Across the Board

After adjusting for that timing effect, the Treasury said the deficit would have been 285 billion dollars, an increase of 94 billion dollars, or 49 percent, from the year-ago period. Even on that adjusted basis, the deterioration was substantial.

The record October outlay total of 773 billion dollars reflected broad pressure on the spending side. Analysts pointed to a surge in defence spending and to the rising cost of interest on the national debt as two of the largest drivers. Gross interest payments reached 115 billion dollars in October, the worst October figure on record. Over the past 12 months, interest payments have totalled about 1.4 trillion dollars, absorbing roughly 28 cents of every dollar the government collects in revenue, the highest share on record.

Social Security, Medicare and Medicaid also continued to push total spending higher. The Treasury reported that outlays for the full fiscal 2026 year rose by 217 billion dollars, with most of that increase coming from those programmes.

## What the Record Start Means for the Year Ahead

A single month does not determine a full fiscal year, and October's figures were flattered by the calendar shift that pulled November payments forward. But the underlying picture is harder to dismiss. Even after stripping out the timing effect, the deficit grew by nearly half compared with a year earlier, and receipts fell while spending climbed by double digits.

The result adds pressure on the administration's deficit-reduction plans. Bessent's target of bringing the gap down to 3 percent of GDP would require a sharp reversal from the 6.2 percent recorded in fiscal 2026, and the first month of fiscal 2027 has moved in the opposite direction.

Sources: Reuters, Bloomberg Law, Congressional Budget Office, ZeroHedge