The calendar year may have a few weeks left to tick off, but as far as the government’s budget is concerned, we’re in fiscal 2026. And in a matter of weeks, the Treasury has already paid out a 12-figure sum to service the nation’s debt. Unlike the tax and calendar year, the government’s financial calendar runs to the end of September. According to Treasury data, in the nine weeks since, it has spent $104 billion in interest on its $38 trillion borrowing burden. That’s more than $11 billion a week, and already represents 15% of federal spending in the current fiscal year.
Economists may be hopeful that the Treasury would make some New (fiscal) Year’s resolutions: Perhaps either scaling back its borrowing, and the additional interest rates on that debt as a result, or drumming up some meaningful revenue to offset the costs.
President Trump and his cabinet have been discussing debt more meaningfully in this administration. While economists say some of their methods are “peculiar,” the Oval Office has nevertheless devised some money-making schemes, like tariffs, estimated to offset $3 trillion through fiscal year 2035. This is, unfortunately, is $1 trillion lower than previous estimates from the Congressional Budget Office (CBO) earlier this year.
There’s also the issue of how much money will be left over to offset the debt from tariff revenue. Current estimations suggest that duties will bring in between $300 billion and $400 billion a year, which would help to pay a fraction of the yearly interest payments totaling more than $1 trillion in gross spending in 2025. However, President Trump has pledged to share proceeds from the tariff project with individuals, sharing a “dividend” of $2,000 per person. This, according to the Committee for a Responsible Federal Budget (CRFB), would cost $600 billion annually.
While money is coming in to help rebalance the books (unless it has already been spent, and more, on tariff rebate cheques), government borrowing doesn’t appear to be slowing. Last week, the Peterson Foundation, which lobbies for responsible fiscal action, published an analysis of the Treasury’s Quarterly Refunding process which shares government borrowing expectations. The foundation wrote that the government’s borrowing will go up, issuing $158 billion more in debt for the first half of this fiscal year compared to the same period a year prior.
Debt is a key risk for 2026
In its summary of macro views for global economics next year, Deutsche Bank is generally bullish. It expects global growth of 3.2% in 2026, with the U.S. economy projected to expand by 2.4%. Trade uncertainty fading will boost this growth, the bank added, with households also given a lift by tax cuts from Trump’s “One Big, Beautiful Bill” Act.
But deficits cast a shadow, on a global scale, over that rosy outlook. The institution wrote: “Many countries face high deficits with limited fiscal and monetary ability. The expected structural shift towards fiscal impulse in 2026 will further widen deficits and heighten concerns around ongoing debt sustainability issues.”
In the U.S., in particular, fiscal risks are on the rise, the bank added: “We expect 2026 deficit to reach 6.7%, with further widening if we see lower tariff revenues or more targeted fiscal stimulus that renews market concerns. Congress is also up against the clock to negotiate on healthcare subsidies and appropriations bills before the stopgap funding again expires on January 30.”
The government may also be banking on a shift of wealth over the next few decades, which could be leveraged to balance its bottom line. The Great Wealth Transfer is expected to see $80 trillion change hands over the next 20 years, according to UBS. Some studies put that figure even higher, saying as much as $124 trillion will be passed down from older generations to their younger counterparts.
And this new flow of wealth represents an opportunity for tax revenue, UBS’s chief economist Paul Donovan believes. “Governments have long mobilized private wealth to support public finances,” he told a media briefing last month. “There are several approaches. One is to influence market behavior—encouraging individuals to buy government bonds through incentives like tax-free premium bonds, which channel savings directly into state financing. Prudential regulation can also steer pension funds toward domestic government debt, as seen in the UK after 1945, when a debt-to-GDP ratio of 240% was successfully reduced over decades.”
He added: “More contentious options exist, such as taxing wealth through capital gains or inheritance levies. In practice, the initial focus tends to be on financial repression—using tax incentives or regulation to direct money into government bonds—before moving toward wealth taxation.”
