Interest on the debt outran defense by $141bn in FY2026 to August
The Treasury's own ledger shows $6,811bn spent against $4,845bn collected in eleven months. Net interest, at $1,017bn, is the second-largest line.
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- What happened
- The Monthly Treasury Statement for August 2026, released September 11, 2026, records federal receipts of $4,845.5 billion and outlays of $6,811.0 billion for October 2025 through August 2026, a deficit of $1,965.6 billion. Net interest on the public debt reached $1,017.0 billion over the same eleven months, $140.8 billion more than the $876.2 billion spent on national defense.
- Why
- Interest is the one large outlay that is set by arithmetic rather than by a vote: the stock of debt held by the public multiplied by the average rate the Treasury pays on it. Both rose between August 2025 and August 2026.
- The numbers that matter
- $1,965.6bnDeficit, October 2025 to August 2026$1,017.0bnNet interest outlays over the same eleven months$876.2bnNational defense outlays over the same eleven months3.475%Average rate on marketable Treasury debt, August 31, 2026
- Why it matters
- Every dollar of deficit is borrowed from the public and carries interest into future budgets. Receipts covered 71.1% of outlays through August 2026; the remaining 28.9% was borrowed, and the cost of that borrowing competes with every other line a household cares about, from Social Security to defense.
- What happens nextas we saw it on 28 Sep 2026
- Fiscal year 2026 ends on September 30, 2026. The Fiscal Data release calendar, checked on September 28, 2026, listed the following Monthly Treasury Statement release on November 12, 2026 and showed no October entry; the date of the year-end statement should be confirmed on that calendar.
Federal outlays by function
Net interest is the second-largest use of federal money in fiscal year 2026 through August, ahead of Medicare, Medicaid and defense.
| Social Security | 1525.9 |
|---|---|
| Net interest | 1017.0 |
| Medicare | 979.3 |
| Health (incl. Medicaid) | 925.7 |
| National defense | 876.2 |
| Income security | 645.2 |
$ billions, net outlays, FY2026 through August 2026Source: Bureau of the Fiscal Service, Monthly Treasury Statement, August 2026, Table 9, released September 11, 2026
Go deeper
The federal government paid more to its lenders than to its armed forces in the first eleven months of fiscal year 2026. That is not an estimate. It is a line in the Treasury's own cash ledger, the Monthly Treasury Statement, and the gap is $140.8 billion.
The statement for August 2026 was published by the Bureau of the Fiscal Service on September 11, 2026 and covers October 1, 2025 through August 31, 2026, eleven of the twelve months of fiscal year 2026. Every figure below comes from its Tables 1, 5 and 9, retrieved from the Fiscal Data API on September 28, 2026.
What the ledger says
Data
Receipts of $4,845.5 billion, outlays of $6,811.0 billion, a deficit of $1,965.6 billion
Table 1 records fiscal-year-to-date receipts of $4,845,452 million, outlays of $6,811,043 million and a deficit of $1,965,591 million for October 2025 through August 2026. For the same eleven months of fiscal year 2025 it shows receipts of $4,690,953 million, outlays of $6,664,260 million and a deficit of $1,973,307 million.
Table 1 records fiscal-year-to-date receipts of $4,845,452 million, outlays of $6,811,043 million and a deficit of $1,965,591 million for October 2025 through August 2026. For the same eleven months of fiscal year 2025 it shows receipts of $4,690,953 million, outlays of $6,664,260 million and a deficit of $1,973,307 million.
Wealth Signal calculation
Receipts rose 3.3%, outlays rose 2.2%, and the deficit was $7.7 billion smaller than a year earlier
$4,845,452m ÷ $4,690,953m − 1 = +3.3%. $6,811,043m ÷ $6,664,260m − 1 = +2.2%. $1,973,307m − $1,965,591m = $7,716m. Receipts covered $4,845,452m ÷ $6,811,043m = 71.1% of outlays; the other 28.9% was borrowed or drawn from cash.
$4,845,452m ÷ $4,690,953m − 1 = +3.3%. $6,811,043m ÷ $6,664,260m − 1 = +2.2%. $1,973,307m − $1,965,591m = $7,716m. Receipts covered $4,845,452m ÷ $6,811,043m = 71.1% of outlays; the other 28.9% was borrowed or drawn from cash.
Fact
CBO attributes the smaller deficit to a calendar quirk in August 2025
In its Monthly Budget Review for August 2026, published September 9, 2026, the Congressional Budget Office notes that payments due on September 1, 2025, a holiday, were made in August 2025, inflating the prior-year base. Its estimate is that “if not for those shifts, the deficit thus far for fiscal year 2026 would have been $82 billion more than the shortfall for the same period in fiscal year 2025”. That is CBO's adjusted estimate, not a Treasury figure.
In its Monthly Budget Review for August 2026, published September 9, 2026, the Congressional Budget Office notes that payments due on September 1, 2025, a holiday, were made in August 2025, inflating the prior-year base. Its estimate is that “if not for those shifts, the deficit thus far for fiscal year 2026 would have been $82 billion more than the shortfall for the same period in fiscal year 2025”. That is CBO's adjusted estimate, not a Treasury figure.
| Line | Oct 2025–Aug 2026 | Oct 2024–Aug 2025 | Change |
|---|---|---|---|
| Total receipts | $4,845.5bn | $4,691.0bn | +$154.5bn |
| Individual income taxes | $2,548.0bn | $2,357.6bn | +$190.4bn |
| Corporation income taxes | $294.9bn | $389.6bn | −$94.8bn |
| Customs duties | $167.3bn | $165.2bn | +$2.1bn |
| Total outlays | $6,811.0bn | $6,664.3bn | +$146.8bn |
| Deficit | $1,965.6bn | $1,973.3bn | −$7.7bn |
Source: Bureau of the Fiscal Service, Monthly Treasury Statement, August 2026, Tables 1 and 9, released September 11, 2026. Changes are this publication's arithmetic on the statement's figures.
Where the dollar goes
Table 9 sorts outlays by function rather than by department. Five functions account for $5,324.0 billion, or 78.2% of everything spent through August.
22.4¢
of each outlay dollar went to Social Security
$1,525.9bn, FY2026 through August
14.9¢
went to net interest on the public debt
$1,017.0bn, FY2026 through August
14.4¢
went to Medicare
$979.3bn, FY2026 through August
12.9¢
went to national defense
$876.2bn, FY2026 through August
Data
Social Security, net interest, Medicare, health and defense, in that order
Table 9 shows net outlays of $1,525,869 million for Social Security, $1,016,966 million for net interest, $979,300 million for Medicare, $925,698 million for the health function and $876,163 million for national defense, then $645,230 million for income security and $395,647 million for veterans. The health function is mostly Medicaid: Table 5 records $654,995 million of grants to states for Medicaid, up from $607,768 million a year earlier.
Table 9 shows net outlays of $1,525,869 million for Social Security, $1,016,966 million for net interest, $979,300 million for Medicare, $925,698 million for the health function and $876,163 million for national defense, then $645,230 million for income security and $395,647 million for veterans. The health function is mostly Medicaid: Table 5 records $654,995 million of grants to states for Medicaid, up from $607,768 million a year earlier.
| Function | Oct 2025–Aug 2026 | Oct 2024–Aug 2025 | Change | Change (%) |
|---|---|---|---|---|
| Social Security | $1,525.9bn | $1,447.3bn | +$78.5bn | +5.4% |
| Net interest | $1,017.0bn | $933.5bn | +$83.5bn | +8.9% |
| Medicare | $979.3bn | $964.8bn | +$14.5bn | +1.5% |
| Health (mostly Medicaid) | $925.7bn | $885.3bn | +$40.4bn | +4.6% |
| National defense | $876.2bn | $840.6bn | +$35.6bn | +4.2% |
| Income security | $645.2bn | $668.0bn | −$22.7bn | −3.4% |
Source: Bureau of the Fiscal Service, Monthly Treasury Statement, August 2026, Table 9, released September 11, 2026. Changes are this publication's arithmetic on the statement's figures in millions, rounded to $0.1 billion. The prior-year column carries the August 2025 timing shift CBO describes above.
Net interest grew by more dollars than any other function. Social Security is a benefit Congress designed; interest is the consequence of every deficit that came before.
Interest versus defense, and what “net” means
The statement carries two interest figures. Table 5, organized by agency, lists $1,267,362 million under the Department of the Treasury as “Interest on Treasury Debt Securities (Gross)”. Table 9's $1,016,966 million is net interest, the figure that measures what the government pays to outsiders.
Fact
Gross interest includes what the Treasury pays to itself
About $7.7 trillion of the $40.1 trillion total public debt is held by federal trust funds, chiefly Social Security and Medicare. Interest on those securities is an outlay for the Treasury and a receipt for the trust fund, so it nets to zero for the government as a whole. Table 5 records $215,941 million of “Interest Received by Trust Funds” as an offsetting receipt through August 2026, up from $182,938 million a year earlier. Net interest also subtracts other interest the government earns.
About $7.7 trillion of the $40.1 trillion total public debt is held by federal trust funds, chiefly Social Security and Medicare. Interest on those securities is an outlay for the Treasury and a receipt for the trust fund, so it nets to zero for the government as a whole. Table 5 records $215,941 million of “Interest Received by Trust Funds” as an offsetting receipt through August 2026, up from $182,938 million a year earlier. Net interest also subtracts other interest the government earns.
Wealth Signal calculation
Net interest exceeded defense by $140.8 billion on the function basis, and by $184.3 billion against the Pentagon's own line
$1,016,966m − $876,163m = $140,803m against the national defense function, which also includes nuclear weapons work at the Department of Energy. Against Table 5's “Department of Defense — Military Programs” total of $832,633 million, the gap is $184,333m. Net interest was 21.0% of receipts ($1,016,966m ÷ $4,845,452m) and 39.9% of individual income tax receipts ($1,016,966m ÷ $2,547,998m).
$1,016,966m − $876,163m = $140,803m against the national defense function, which also includes nuclear weapons work at the Department of Energy. Against Table 5's “Department of Defense — Military Programs” total of $832,633 million, the gap is $184,333m. Net interest was 21.0% of receipts ($1,016,966m ÷ $4,845,452m) and 39.9% of individual income tax receipts ($1,016,966m ÷ $2,547,998m).
| Fiscal year | Net interest on the public debt | Department of Defense, military | Interest minus defense |
|---|---|---|---|
| FY2023 (Oct 2022–Sep 2023) | 710 | 776 | −66 |
| FY2024 (Oct 2023–Sep 2024) | 949 | 826 | +123 |
| FY2025 (Oct 2024–Sep 2025) | 1,028 | 868 | +160 |
Source: Congressional Budget Office, Monthly Budget Review: Summary for Fiscal Year 2024 (November 8, 2024) and Summary for Fiscal Year 2025 (November 10, 2025). These are CBO's full-year figures on its own basis, which differs slightly from the Treasury tables above; the FY2026 figures in this piece cover eleven months and are not directly comparable. The difference column is this publication's arithmetic.
On CBO's full-year figures, interest was below defense in fiscal 2023 and above it in both fiscal 2024 and fiscal 2025, when net interest passed $1 trillion for the first time.
Two Fiscal Service numbers explain most of the growth in the interest bill: the size of the debt and the rate paid on it.
Data
Debt held by the public was $32.36 trillion on September 24, 2026
The Debt to the Penny dataset records debt held by the public of $32,362,728,656,693 on September 24, 2026, intragovernmental holdings of $7,706,079,335,231 and total public debt outstanding of $40,068,807,991,925. Debt held by the public is the part that generates net interest.
The Debt to the Penny dataset records debt held by the public of $32,362,728,656,693 on September 24, 2026, intragovernmental holdings of $7,706,079,335,231 and total public debt outstanding of $40,068,807,991,925. Debt held by the public is the part that generates net interest.
Data
The average rate on marketable Treasury debt was 3.475% on August 31, 2026
The Fiscal Service's “Average Interest Rates on U.S. Treasury Securities” gives an average of 3.475% on total marketable debt at August 31, 2026, up from 3.415% at August 31, 2025. Treasury bills averaged 3.788%, notes 3.345% and bonds 3.453%. Across all interest-bearing debt the average was 3.490%, up from 3.372%.
The Fiscal Service's “Average Interest Rates on U.S. Treasury Securities” gives an average of 3.475% on total marketable debt at August 31, 2026, up from 3.415% at August 31, 2025. Treasury bills averaged 3.788%, notes 3.345% and bonds 3.453%. Across all interest-bearing debt the average was 3.490%, up from 3.372%.
That average is far below the market yield on new borrowing: the ten-year Treasury yield stood at 5.00% on September 15, 2026, and the Federal Reserve raised its target range to 3.75%–4.00% on September 16, 2026. The lag is mechanical. A bond keeps the coupon it was issued with until it matures, so bills reprice within a year while a ten-year note issued in 2020 at under 1% keeps paying that until 2030. The average moves toward the market rate one maturity at a time. Our piece on the ten-year at 5% sets out how that yield is built.
Wealth Signal calculation
Each percentage point on the average rate is worth about $324 billion a year on the debt held by the public
$32,362,729m × 1% = $323,627m. This is a sensitivity, not a prediction: what a one-point change in the average rate would cost or save over a full year if the whole stock outstanding on September 24, 2026 carried it. Only securities that mature and are refinanced reprice, so any rate move arrives gradually.
$32,362,729m × 1% = $323,627m. This is a sensitivity, not a prediction: what a one-point change in the average rate would cost or save over a full year if the whole stock outstanding on September 24, 2026 carried it. Only securities that mature and are refinanced reprice, so any rate move arrives gradually.
How to read the Monthly Treasury Statement
The MTS is a cash statement: it records money that actually left or entered the Treasury's accounts in the month, which is why it is the number that matters for borrowing. It is published around the eighth business day after the month ends and is free at fiscaldata.treasury.gov as a PDF and as an API.
- Table 1 is the summary: receipts, outlays and the deficit, month by month, current and prior fiscal year.
- Table 5 sorts outlays by agency down to program level; Medicaid grants and gross interest live here.
- Table 9 sorts the same outlays by function, which is why national defense ($876.2bn) is larger than the Pentagon's own line ($832.6bn).
- Watch the calendar. Benefits due on a weekend or holiday are paid the month before, which is why August 2025 outlays were $689.1 billion against $526.8 billion in August 2026.
Sep 9, 2026
CBO Monthly Budget Review for August 2026 (estimate)
Sep 11, 2026
Monthly Treasury Statement for August 2026 published
Sep 24, 2026
Debt to the Penny: debt held by the public $32.36 trillion
Sep 30, 2026
Fiscal year 2026 ends
Nov 12, 2026
Following MTS release on the Fiscal Data calendar, as of September 28, 2026
What it means for your money
Nothing in the statement is a bill addressed to a household, but the arithmetic is closed. A deficit is borrowed from the public; the borrowing adds to the $32.36 trillion; that stock multiplied by the average rate produces the following year's interest line; and that line is paid before anything else is decided.
Interpretation
Interest is the outlay that competes with everything else without a vote
The $1,017.0 billion of net interest through August 2026 is set by contracts already signed. The ledger can only balance through higher receipts, lower outlays elsewhere, or more borrowing that raises the following year's interest. Which of those happens is a political choice, and this publication takes no view on it. The ledger only shows the size of the constraint: 21.0 cents of every dollar of receipts went to net interest.
The $1,017.0 billion of net interest through August 2026 is set by contracts already signed. The ledger can only balance through higher receipts, lower outlays elsewhere, or more borrowing that raises the following year's interest. Which of those happens is a political choice, and this publication takes no view on it. The ledger only shows the size of the constraint: 21.0 cents of every dollar of receipts went to net interest.
- If you hold Treasuries or a money-market fund, the 3.788% average on bills and the 5.00% ten-year yield are the other side of this ledger: the government's outlay is the lender's income, measured in real terms against the 3.4% rise in the CPI over the twelve months to August 2026.
- If you pay a mortgage, the same debt arithmetic feeds the supply of Treasury securities that mortgage rates are priced from; the 30-year fixed rate was 6.95% in the week of September 17, 2026.
- If you pay income tax, the ratio to watch is net interest as a share of receipts, 21.0% through August 2026. The fiscal and monetary levers that move it are in the glossary; the release calendar shows when the year-end statement arrives.
This piece does not claim that the deficit or the interest bill is unsustainable, that taxes or rates are headed in any direction, or that any spending line should be cut. It reports the Treasury's cash ledger as published on September 11, 2026, the debt figure for September 24, 2026 and the average interest rate for August 31, 2026, with arithmetic any reader can repeat. Prior-year comparisons carry the August 2025 timing shift CBO identifies, and fiscal year 2026 totals are not final until the September statement is published.
Sources
- Monthly Budget Review: Summary for Fiscal Year 2024 (published November 8, 2024)Congressional Budget Office · Sep 29, 2026 · Primary source
- Monthly Budget Review: Summary for Fiscal Year 2025 (published November 10, 2025)Congressional Budget Office · Sep 29, 2026 · Primary source
- Monthly Treasury Statement, August 2026, Table 1: Summary of Receipts, Outlays, and the Deficit/Surplus of the U.S. Government (U.S. Treasury Fiscal Data, record date 2026-08-31)Bureau of the Fiscal Service, U.S. Department of the Treasury · Sep 28, 2026 · Primary source
- Monthly Treasury Statement, August 2026, Table 5: Outlays of the U.S. Government by agency (U.S. Treasury Fiscal Data, record date 2026-08-31)Bureau of the Fiscal Service, U.S. Department of the Treasury · Sep 28, 2026 · Primary source
- Monthly Treasury Statement, August 2026, Table 9: Summary of Receipts by Source, and Outlays by Function (U.S. Treasury Fiscal Data, record date 2026-08-31)Bureau of the Fiscal Service, U.S. Department of the Treasury · Sep 28, 2026 · Primary source
- Debt to the Penny, record date September 24, 2026 (U.S. Treasury Fiscal Data)Bureau of the Fiscal Service, U.S. Department of the Treasury · Sep 28, 2026 · Primary source
- Average Interest Rates on U.S. Treasury Securities, record date August 31, 2026 (U.S. Treasury Fiscal Data)Bureau of the Fiscal Service, U.S. Department of the Treasury · Sep 28, 2026 · Primary source
- Fiscal Data Release Calendar (Monthly Treasury Statement, dataset 015-BFS-2014Q1-13)Bureau of the Fiscal Service, U.S. Department of the Treasury · Sep 28, 2026 · Primary source
- Federal Surplus or Deficit [-] (MTSDS133FMS), monthly, source U.S. Department of the Treasury, Fiscal Service; last updated 2026-09-11Federal Reserve Bank of St. Louis (FRED) · Sep 28, 2026 · Primary source
- Monthly Budget Review: August 2026 (published September 9, 2026)Congressional Budget Office · Sep 28, 2026 · Primary source
- 10-Year Treasury Constant Maturity Rate (DGS10), observation of September 15, 2026U.S. Department of the Treasury via FRED · Sep 15, 2026 · Primary source
- FOMC statement, September 16, 2026Federal Reserve Board · Sep 16, 2026 · Primary source
- Primary Mortgage Market Survey, week of September 17, 2026Freddie Mac · Sep 17, 2026 · Primary source
- Consumer Price Index Summary — August 2026U.S. Bureau of Labor Statistics · Sep 11, 2026 · Primary source
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