America borrowed $1.99 trillion in fiscal 2026, and net interest on the debt passed $1 trillion for the first time.
Photo: Unsplash (freely licensed stock image)
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The US ran a $1.99 trillion deficit in fiscal 2026 as net interest costs passed $1 trillion for the first time. With the 10-year Treasury yield at 5.1%, the interest bill now feeds the deficit, and neither party has a plan.
Long-term bond yields above 5% and a $2 trillion deficit1are giving Americans a taste ofwhat a U.S. debt crisis would be like.9A true emergency would hurt much more, and isn't baked in.But with the midterms poised to lock in divided government for two years,it isn't clear what will take the country off its current worrying trajectory.
Higher interest rates exacerbated by the flood of federal debt issuance5are starting to bite in some parts of the economyand threaten to worsen the government's debt problem.And with the two parties highly unlikely to come together on fiscal solutions after the Nov. 3 midterms,any fixes are years off in the future.
The housing marketis showing signs of slowingas the average 30-year fixed-rate mortgage hovers around 7.5%.4Pending home salesfell 4% in September,Redfin said Monday, the biggest monthly drop in three years.
Pending home sales fell 4% in September, the biggest monthly drop in three years, as the 30-year fixed mortgage rate hovered near 7.5%.9 月待售房屋签约量下降 4%，为三年来最大单月降幅；30 年期固定房贷利率在 7.5% 附近徘徊。Photo: Unsplash (freely licensed stock image)
PARA 04
Mortgage ratestrackthe 10-year Treasury yield.2The 10-year has climbed 114 basis points, or hundredths of a percentage point,3since the end of February through midday Friday,when the 10-year traded at 5.1%.
Several factorsare pushing upthe 10-year,including the war with Iran, which kicked off on Feb. 28 and precipitated the rise in long-term yields.Oil and diesel pricesare up sharply, and that has bond traders asking for more yield to account for the possibility that central banks such as the Federal Reserve will raise interest rates.
Investorswant more compensation to hold longer-term bondsin part because they believe the U.S. government will continue to flood the market with them.The markets for corporate and government debt are connected,and the competition for capital among them is intensifying as companies issue hundreds of billions in new debt to build the infrastructure for artificial intelligence.6Global investors who want to buy low-risk, long-term debt have attractive alternatives to the Treasury market.
Companies are issuing hundreds of billions of dollars of debt to build AI infrastructure, competing with the Treasury for the same long-term capital.企业为建设人工智能基础设施发行数千亿美元新债，与财政部争夺同一批长期资金。Photo: Unsplash (freely licensed stock image)
PARA 07
If the U.S. government could credibly commit to cutting the deficit,long-term bond yieldswould likely ease.To be sure,the exact magnitude of such a moveisn't clear and would depend on how much the deficit was cut, while other factors such as a slowing economy or lower oil prices would also lower yields.
But the possibility of a virtuous cycle of lower deficits and lower yields7is why Treasury Secretary Scott Bessent has arguedthat the U.S. ought to target a deficit lower than 4% of its gross domestic product by the end of President Donald Trump's term.
Chart 3 | How heavy issuance, higher yields and a larger interest bill reinforce one anotherEditor's schematic, based on the CBO's debt arithmetic and the argument in the article.
PARA 09
There is almost no way the U.S. will hit that target.The deficitwas $1.992 trillion for the 2026 fiscal year, up 12% from last year,data released Friday by the U.S. Treasury showed.That deficit amounts to approximately 6.2% of gross domestic product,8based on an estimate of third-quarter GDP.
美国几乎不可能达到这个目标。2026 财年的赤字为 1.992 万亿美元，比上一财年增加 12%，美国财政部周五公布的数据显示。这一赤字约占国内生产总值的 6.2%，这是按第三季度 GDP 估算的。
Chart 1 | Social Security, Medicare and net interest now absorb the bulk of federal spendingSource: US Treasury, fiscal 2026 (year to Sept 30). Defence is a budget function, shown for scale. Figures rounded.
PARA 10
Higher ratesmake debt reduction tougher.If interest rates stay a half-point above the CBO's expectations,the cumulative deficit over 10 yearswill come in $1.9 trillion higher, the agency estimates.If rates overshoot by 1.5 points, that adds $6 trillion in deficits.
Chart 2 | Net interest passed $1 trillion in FY2026, from $352 billion in FY2021Source: US Treasury. Net interest = gross interest paid minus interest received.
PARA 11
The CBOexpectsthe 10-year Treasury to average 4.3% over that period,compared with 5.1% today.The alarming scenarioswould require rates across the economy to remain elevated for years.
“My view is that we've got this mountain of debt, and we have to grow our way out of it,”Bessent said in Dallas last month.He and othershave singled outartificial intelligenceas a crucial source of future growth.
AI could helpbut can't fix the problem entirely.It would take a decade of 7.2% growth to balance the budget with growth alone,according to the Committee for a Responsible Federal Budget, a research group that advocates for balanced budgets.
GDP growthwas recently revised up for the second quarterfrom 1.5% to 2.2% at an annualized rate.The acceleration that quickly would get us to 7.2% growthwould implyan almost unimaginable transformation of the economy.
第二季度 GDP 增速最近被上修从年化 1.5% 提高到 2.2%。而要这么快就升到 7.2% 的增速，意味着整个经济要发生几乎难以想象的变化。
PARA 15
Trumpwill soon enter the final two years of his presidency,a moment when presidents often take on big, legacy-defining projects.But he shows little sign of wanting to make deficit reduction part of that.Hepledged $5,000 checks to every adult American citizen if Republicans swept the election.
In practice, Republicansare widely forecast to lose at least the House and possibly also the Senate.Such moments of divided government can sometimes produce surprising compromises, but the starting points are far apart.Rep. Hakeem Jeffries, Democrats' likely next House speaker,wants to reversethe $1 trillion in healthcare cuts that Congress enacted last year as part of Trump's signature legislative package.
A divided government after the midterms makes any fiscal fix a matter of years, not months.中期选举后可能出现的分裂政府，让任何财政修复都推迟到多年以后。Photo: Unsplash (freely licensed stock image)
PARA 17
And that's leaving asidethe deep animositybetween the parties.
而这还没有算上两党之间那深深的敌意。
PARA 18
The overall U.S. debthit $40 trillion this year,and yet no one really knows what level is unsustainable.A full-on debt crisislikely remains much further out in the future.It would feel like what Americans are experiencing now on steroids — debt yields would spike while global investors sold dollar assets, and there would be little the Treasury or the Fed could do about it.
For now, though,higher yieldsare also attracting investors to U.S. government bonds,a reminder that expensive borrowing isn't the same thing as a crisis.But the bottom line is that economics alone can't solve the problem.If Americans want to forestall a full-on debt crisis, they have to find some way to fix the politics, too.
A budget deficit is the gap between what a government spends and what it collects in taxes and fees in a year. It is not the same as debt: the deficit is this year's shortfall, while debt is the pile of past shortfalls.
Why it matters here ▸ The US gap reached $1.99 trillion in fiscal 2026, about 6.2% of GDP — the third-largest on record.
拓展知识：判断赤字大不大，要看它占 GDP 的比重，而不是绝对金额：美国 2026 财年为 6.2%，欧盟财政规则的上限是 3%。在失业率不高的时候赤字仍然很高，通常被称作“结构性赤字”——不是经济差造成的，而是税制与开支结构本身造成的。
Extended note: Always scale a deficit by GDP. A gap that looks tolerable in a growing economy becomes dangerous when growth slows, because tax receipts fall just as spending rises.
2Treasury yield/ˈtreʒəri jiːld/点击看中文解释 ↓
The yield on a Treasury is the annual return an investor gets from lending money to the US government. Yields rise when bond prices fall — that is, when investors demand a bigger discount to hold the debt.
Why it matters here ▸ The 10-year yield has climbed 114 basis points since February to 5.1%, and mortgages track it.
Extended note: The 10-year is the reference rate for everything from mortgages to corporate bonds. A one-point move on $40 trillion of debt is roughly $400 billion a year.
3Basis point/ˈbeɪsɪs pɔɪnt/点击看中文解释 ↓
A basis point is one hundredth of a percentage point: 100 basis points make 1 percentage point. It exists so that professionals can talk about small rate moves without saying “zero point zero one”.
Why it matters here ▸ The 10-year has risen 114 basis points since late February — from about 4% to 5.1%.
Extended note: On a bond with 15 years of duration, a 100-basis-point rise in yields means a price fall of roughly 15%.
4Mortgage rate/ˈmɔːɡɪdʒ reɪt/点击看中文解释 ↓
A mortgage rate is the interest rate on a home loan. In the US, the 30-year fixed rate is the standard: the rate is set once and never changes for the life of the loan.
Why it matters here ▸ The average 30-year fixed rate is around 7.5%, and pending home sales fell 4% in September.
Extended note: Banks fund fixed-rate mortgages by selling mortgage-backed securities, whose yields are priced off Treasuries — hence the tight link.
5Debt issuance/det ˈɪʃuəns/点击看中文解释 ↓
Issuance is the act of selling new bonds. When a government runs a deficit, it covers the gap by issuing debt — new bills, notes and bonds that investors must absorb.
Why it matters here ▸ The article calls it “the flood of federal debt issuance”: more supply means investors demand a higher yield to take it.
Extended note: Gross issuance is much larger than the deficit, because maturing debt must be rolled over as well as new debt sold.
6Competition for capital/ˌkɒmpəˈtɪʃn fə ˈkæpɪtl/点击看中文解释 ↓
Competition for capital means several borrowers chasing the same pool of savings. If companies issue hundreds of billions of bonds for AI data centres, they compete with the government for the same long-term buyers.
Why it matters here ▸ The article says the corporate and government debt markets are “connected”, and AI borrowing is making the competition “intensify”.
The deficit-to-GDP ratio divides the annual shortfall by the size of the economy. It lets you compare countries of different sizes, and shows whether borrowing is outrunning the economy's ability to carry it.
Why it matters here ▸ The US gap is about 6.2% of GDP, against Bessent's target of below 4%.
Extended note: Cross-country comparisons need care: US federal figures exclude state and local budgets, while euro-area numbers consolidate general government.
9Debt crisis/det ˈkraɪsɪs/点击看中文解释 ↓
A debt crisis is the moment lenders stop rolling over a government's debt at any reasonable price. Yields spike, the currency falls, and the government cannot fund itself without outside help.
Why it matters here ▸ The article says the US is not there yet, but higher yields are “giving Americans a taste” of what it would feel like.
a small experience of something, often a warning of what is to come
The sell-off gave investors a taste of what a real debt crisis would feel like.
对……的一点体验（常暗示更糟的还在后面）
这轮抛售让投资者尝到了一丝真正债务危机的滋味。
baked in/beɪkt ɪn/
already reflected in prices or plans, so no longer a surprise
A true emergency would hurt much more, and isn't baked in.
已被计入价格、已成定局
真正的危机伤害会大得多，而且并没有被提前计入价格。
bite/baɪt/
to start to have a painful effect
Higher rates are starting to bite in some parts of the economy.
开始产生痛感、开始见效（多指坏影响）
更高的利率正开始在一些经济领域造成痛感。
come together on/kʌm təˈɡeðər ɒn/
to reach agreement about something after disagreeing
The two parties are unlikely to come together on fiscal solutions after the midterms.
就……达成一致
中期选举后，两党不太可能在财政方案上达成一致。
flood the market/flʌd ðə ˈmɑːkɪt/
to sell so much of something that supply overwhelms demand
Investors believe the government will continue to flood the market with bonds.
向市场大量抛售、淹没市场
投资者认为政府会继续向市场大量发债。
mountain of debt/ˈmaʊntən əv det/
a very large amount of debt, pictured as a pile that must be climbed
We've got this mountain of debt, and we have to grow our way out of it.
堆积如山的债务
我们背着这座债务大山，必须靠增长走出去。
grow our way out of/ɡrəʊ aʊə weɪ ˈaʊt əv/
to escape a problem by expanding the economy rather than cutting spending
Bessent argues the US can grow our way out of its debt pile.
靠经济增长摆脱（债务）
贝森特主张，美国可以靠增长走出债务泥潭。
leaving aside/ˈliːvɪŋ əˈsaɪd/
not including something in the discussion, often because it is an extra problem
And that's leaving aside the deep animosity between the parties.
姑且不谈、先不算
而这还没有算上两党之间深深的敌意。
on steroids/ɒn ˈsterɔɪdz/
much stronger or more extreme than the normal version
A full crisis would feel like what Americans are experiencing now on steroids.
（像用了兴奋剂一样）被放大数倍
一场全面危机，会像美国人现在的处境被放大数倍。
the bottom line/ðə ˈbɒtəm laɪn/
the most important conclusion after everything else is considered
The bottom line is that economics alone can't solve the problem.
归根结底、最重要的是
归根结底，单靠经济学解决不了这个问题。
读后测验 · Check Your Understanding
3 道题。点选项立即判分；解析需要单独点开。
Q1What was the US budget deficit for fiscal 2026?
正确答案：B
财政部周五公布的数字是 1.992 万亿美元，同比增加 12%。A 是上一财年的 1.78 万亿；C 是 2021 年疫情期间的 2.77 万亿（历史最高）；D 是净利息支出，不是赤字。 The deficit was $1.992 trillion for the 2026 fiscal year, up 12% from last year, data released Friday by the U.S. Treasury showed.Option A is last year's gap; C is the pandemic-era record; D is the interest bill, not the deficit.
Q2Why do higher Treasury yields make the deficit worse?
正确答案：A
逻辑链是：收益率上升→付息与再融资更贵→赤字更大。CBO 的敏感性测算正是这个逻辑：利率比基准高 0.5 个百分点，十年累计赤字多 1.9 万亿美元。B 把因果说反了；C 在文中没有依据；D 在算术上不成立——分母没变，分子变大，比率只会更高。 Higher rates make debt reduction tougher. If interest rates stay a half-point above the CBO's expectations, the cumulative deficit over 10 years will come in $1.9 trillion higher, the agency estimates.B reverses cause and effect; C is not supported by the text; D is arithmetically wrong.
Q3What is the author's main point in the final paragraph?
正确答案：B
作者明确区分“借钱贵”和“危机”，最后把结论落在政治上：“单靠经济学解决不了这个问题”。A 与原文相反；C 曲解了“高收益率吸引投资者”这句；D 与 CRFB 的 7.2% 测算相反——AI 帮得上忙，但远远不够。 But the bottom line is that economics alone can't solve the problem. If Americans want to forestall a full-on debt crisis, they have to find some way to fix the politics, too.A contradicts the text; C misreads the investor point; D ignores the 7.2% growth requirement.
