Federal Deficit Hit $2 Trillion in FY 2026, CBO Reports

WASHINGTON, The federal government ran a $2 trillion deficit in fiscal year 2026, the Congressional Budget Office reported Oct. 8, marking the first time outside of wartime or recession that the annual shortfall has crossed that threshold.

<cite index="10-1">The deficit totaled $2.0 trillion in fiscal year 2026, CBO estimated, $218 billion more than the deficit recorded in fiscal year 2025.</cite>

<cite index="11-4,11-5">The figure came in $140 billion above the $1.9 trillion CBO had projected in its latest baseline. The $2.0 trillion deficit was the net effect of $7.4 trillion of spending and $5.4 trillion of revenue collections.</cite>

<cite index="18-4">Revenues for the year rose by $169 billion, or 3 percent, but outlays climbed considerably more, up $386 billion, or 6 percent.</cite>

<cite index="18-8,18-9,18-10">Spending on the three largest mandatory programs, Social Security, Medicare and Medicaid, rose by $217 billion, or 7 percent. Driven by a larger total debt and higher interest rates, outlays for net interest on the public debt rose by $115 billion, or 11 percent. Defense spending rose by $48 billion, or 5 percent.</cite>

<cite index="18-5,18-6">The increase in revenues was driven by larger collections of individual income and payroll taxes, which jumped by $255 billion, or 6 percent. Collections of corporate income taxes fell by $70 billion, or 16 percent, due in large part to the more generous tax write-offs for investments provided by the 2025 Republican reconciliation bill.</cite>

<cite index="13-5">The Committee for a Responsible Federal Budget said the deficit ranks among the highest in U.S. history, and the highest ever outside of a war or recession.</cite>

Budget analysts at the nonpartisan Bipartisan Policy Center said the size of the gap is anomalous given current conditions. <cite index="18-12">"Running $2 trillion deficits in a growing economy with low unemployment and no major emergency situation going on is an unsustainable trend," Shai Akabas of the Bipartisan Policy Center told The Wall Street Journal.</cite>

<cite index="11-10">As a share of the economy, the FY 2026 deficit was an estimated 6.2 percent of gross domestic product, 0.3 percentage points higher than the 5.8 percent of GDP recorded for FY 2025.</cite>

<cite index="19-7">Before 2026, the deficit eclipsed $2 trillion only in the pandemic years of 2020 and 2021, and the country had never seen a deficit of even $1 trillion except in the four years after the 2008 financial crisis.</cite>

The CBO report arrived as federal science agencies also closed fiscal year 2026 with a separate spending gap, one that ran in the opposite direction. The National Science Foundation ended the year with money it didn't send out the door.

<cite index="20-3,20-4">The National Science Foundation closed fiscal year 2026 with more than $1 billion in funding still unobligated following a sharp slowdown in research grantmaking. The agency obligated $6.4 billion in research funds this year, down from $8.3 billion in fiscal year 2025, according to data shared by Grant Witness, a decrease of about 23 percent.</cite>

<cite index="20-5">That funding was distributed between 6,218 awards, down from 8,647 the prior year and 10,937 in fiscal year 2024.</cite>

<cite index="20-9">Nature reported earlier this year that NSF was withholding about $1 billion of its budget to fund the White House Office of Science and Technology Policy's Grand Research Challenges initiative.</cite>

<cite index="24-7,24-8">The National Institutes of Health, by contrast, spent its entire external grants budget of roughly $34 billion after a slow start, according to a STAT analysis. Overall, the agency funded around 58,000 projects, a slight drop from the 61,000 awarded during fiscal year 2025 and well below the roughly 63,700 grants awarded annually before the second Trump administration.</cite>

<cite index="19-8,19-9">Based on current law, CBO projects the annual deficit will reach $3 trillion within a decade. That baseline assumes no new recessions, wars, tax cuts, or spending programs, and also assumes interest rates on the debt stay indefinitely below their current levels.</cite>

Sources cited:
- Congressional Budget Office, Monthly Budget Review: September 2026 (https://www.cbo.gov/publication/61985)
- American Action Forum, CBO: FY 2026 Budget Deficit Totaled $2 Trillion (https://www.americanactionforum.org/insight/cbo-fy-2026-budget-deficit-totaled-2-trillion/)
- Committee for a Responsible Federal Budget, CBO Estimates $2.0 Trillion Deficit for Fiscal Year 2026 (https://www.crfb.org/press-releases/cbo-estimates-20-trillion-deficit-fiscal-year-2026)
- The Fiscal Times, Deficit Rose to $2 Trillion for 2026 Fiscal Year: CBO (https://www.thefiscaltimes.com/2026/10/08/Deficit-Rose-2-Trillion-2026-Fiscal-Year-CBO)
- National Review, The Federal Deficit Is Now $2 Trillion (https://www.nationalreview.com/corner/the-federal-deficit-is-now-2-trillion/amp/)
- AIP FYI Science Policy, The Week of Oct 5, 2026 (https://www.aip.org/fyi/the-week-of-october-5-2026)
- STAT News, Analyzing FY 2026 NIH grants: budget spent, but uncertainty lingers (https://www.statnews.com/2026/10/02/nih-grant-funding-fy2026-analysis/)