US Opens Fiscal 2027 With Record $404 Billion October Deficit

The United States opened fiscal 2027 with a $404 billion budget deficit in October, a record for the month and 42% higher than a year earlier, as tax receipts shrank and federal spending climbed to a new October high, the Treasury Department said on Thursday.

The shortfall rose by $120 billion from October 2025, setting a difficult tone for a fiscal year that begins with the government already borrowing heavily. October is the first month of the federal fiscal year, which runs from 1 October to 30 September, so the record sets the tone for the twelve months ahead. Treasury Secretary Scott Bessent has pledged to bring the deficit down to 3% of gross domestic product, but the latest figures show the gap moving in the opposite direction.

Receipts fell as tariff income dropped

Federal receipts totalled $369 billion in October, down $35 billion, or 9%, from a year earlier. The decline was driven in part by a sharp fall in customs collections, which dropped 39% to $19.2 billion from $31.3 billion in October 2025, when President Donald Trump’s tariff revenues reached their peak.

The fall in customs income is striking because tariffs had been one of the administration’s main sources of new revenue. Reuters reported that the drop helped push overall receipts lower even as other revenue streams held up.

Spending hit a record $773 billion

Outlays reached $773 billion, a record for October and $84 billion, or 12%, above the same month last year. The Treasury’s monthly statement put the scale of the month’s spending in sharp relief: for every dollar the government collected in October, it spent more than two.

A calendar quirk behind the headline

Part of the jump reflects timing rather than new spending. Benefit payments due in November were shifted into October in both fiscal years, the Treasury said. After adjusting for that shift, the deficit would have been $285 billion — still $94 billion, or 49%, higher than a year earlier.

The adjustment matters, but it does not change the direction of the story. On either measure, the deficit grew by roughly half compared with the same month last year.

Bessent’s 3% target looks further away

The record October deficit follows a full-year fiscal 2026 deficit of nearly $2 trillion, the largest budget shortfall in five years. That gap was estimated at 6.2% of GDP, up from 5.8% in fiscal 2025 — roughly double the 3% target Bessent has set.

The Congressional Budget Office had estimated the October deficit at $409 billion in a forecast published on 10 November, so the official $404 billion total came in $5 billion below expectations. It was small comfort given the direction of travel.

What happens next

The fiscal picture comes as the wider economy shows strain elsewhere. US home sales fell to a 16-year low in October as mortgage rates bit, and the trade deficit narrowed in September as imports set a record. Together, the figures point to an economy in which households are pulling back while the government borrows more.

Attention now turns to the debt limit, with the Treasury having warned of a deadline in 2027, and to the November figures, due next month, which will show whether October’s record was a one-off or the start of a pattern.