US July Budget Deficit Hits $432 Billion, Largest Monthly Shortfall Since March 2021

The U.S. federal government posted a $432.3 billion deficit in July, far exceeding the consensus forecast of $346 billion and surging roughly 48% from the same month a year ago. It is both a record for July and the largest single-month deficit since March 2021. Medicare costs were a primary driver, with outlays for the month reaching $174 billion compared with $103 billion in June.

Soaring debt interest payments added to the pressure: through the first seven months of fiscal 2026, net interest payments totaled $628 billion, surpassing gross Medicare spending of $588 billion and now running at 3.3% of GDP, above the post-World War II peak of 3.2% set in 1991. Negative tariff revenues compounded the shortfall. The cumulative fiscal-year-to-date deficit through July reached $1.8 trillion, already exceeding the full fiscal 2025 deficit total.