The U.S. budget deficit increased to its highest monthly level in over five years, according to a report from the Treasury Department released on Wednesday. The deficit for July totaled $432.3 billion, a 48% increase compared to the same month last year, marking the largest monthly deficit since March 2021.
In the first ten months of the government's fiscal year, the total deficit reached nearly $1.8 trillion, surpassing the same period in 2025. Medicare expenses for July amounted to $174 billion, significantly higher than the $103 billion spent in June, contributing to a total of $955 billion for the year. This made Medicare the largest expenditure for the month, followed by Social Security at $141 billion and net interest on the national debt at $104 billion.
The budget was also impacted by $33 billion in tariff refunds due to rebates for levies deemed illegal by the Supreme Court. Additionally, a $99 billion reduction was noted because the first of the month was a nonbusiness day, which accelerated various benefits outlays, including Supplemental Security Income and Medicare payments.
For the fiscal year to date, the U.S. has spent $1.17 trillion on servicing the $39.9 trillion national debt, with $32.1 trillion held by the public. This year's debt servicing costs have increased from $1.01 trillion in the same period last year. Net interest, calculated as gross interest minus interest received, totaled $931 billion.
Former President Donald Trump had previously urged the Federal Reserve to lower benchmark interest rates to reduce debt costs but has refrained from criticism since Kevin Warsh was appointed as chairman in May. Market expectations for a Federal Reserve rate hike to control inflation, which has exceeded the 2% target for over five years, have softened due to recent inflation data and payroll reports, with futures traders not anticipating a rate cut for the next five years.