Government Finance 101. Fiscal Policy: Welcome to Alice in Wonderland
Secretary of the Treasury UPDATE (8/2026) The expected yearly deficit for fiscal year 2026, ending September 30, 2026, is $2.1 trillion. This is higher than the deficit of $1.9 trillion in fiscal year 2025. One reason is that the expected $200 billion increase in government revenue from increased tariffs has to be refunded to importers and American companies because the Supreme Court declared the tariffs unconstitutional. The national debt will be around $40 trillion by the end of this fiscal year. Total interest expense will be around $1.1 trillion, with the interest rate a little under 3%. Thus interest expense is now half of the total yearly deficit. Projections are that the national debt will be around $50 trillion in five years (FY 2031). Yearly interest expense might be between $1.5 trillion and $2.0 trillion, which assumes an interest rate of 3% to 4%. These projections assume no new spending programs. This is before any proposed increase in defense spending. Also, i...
