Federal Deficit Hits $2 Trillion in Fiscal 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 largest shortfall in U.S. history outside of a war or a recession.

According to the CBO's September 2026 Monthly Budget Review, the deficit came in at roughly $1.993 trillion for the fiscal year that ended Sept. 30. That's $218 billion, or 12 percent, above the $1.775 trillion deficit posted in fiscal 2025.

The CBO said revenues and outlays both grew, but spending ran far ahead. Revenues rose $169 billion, or 3 percent, to $5.4 trillion. Outlays rose $386 billion, or 6 percent, to $7.4 trillion, according to the CBO report.

The three largest mandatory programs drove much of the increase on the spending side. Outlays for Social Security rose $86 billion, Medicare climbed $77 billion and Medicaid added $55 billion, according to figures reported by the Washington Times citing the CBO data. Net interest on the public debt jumped $115 billion, or 11 percent, to roughly $1.14 trillion, reflecting a larger total debt load and sustained higher rates.

Defense spending added $48 billion, or 5 percent, to the outlay total.

On the revenue side, individual income and payroll tax collections rose $255 billion, or 6 percent. That gain was partially offset by a 16 percent drop in corporate income tax receipts, which the CBO attributed to expanded investment deductions under the 2025 Republican reconciliation law. Customs revenues also declined after the administration refunded approximately $130 billion in tariffs following a Supreme Court ruling, according to Taxpayers for Common Sense, which cited the CBO review.

As a share of the economy, the CBO put the deficit at an estimated 6.2 percent of gross domestic product, up from 5.8 percent the prior year, according to an analysis by the American Action Forum.

The final number came in $140 billion above the $1.9 trillion deficit the CBO had projected in its most recent baseline.

Budget watchdogs pushed back hard on the result. The Committee for a Responsible Federal Budget noted that the deficit ranks among the highest in U.S. history outside wartime or recession. Shai Akabas of the Bipartisan Policy Center told the Wall Street Journal that "running $2 trillion deficits in a growing economy with low unemployment and no major emergency situation going on is an unsustainable trend."

The White House did not immediately respond to a request for comment on the CBO figures. Congress is expected to begin fiscal year 2027 appropriations negotiations against this backdrop, with no full-year spending deal yet in place.

Sources cited:
- Congressional Budget Office, Monthly Budget Review: September 2026 (https://www.cbo.gov/publication/61985)
- The Fiscal Times (https://www.thefiscaltimes.com/2026/10/08/Deficit-Rose-2-Trillion-2026-Fiscal-Year-CBO)
- The Washington Times (https://www.washingtontimes.com/news/2026/oct/8/federal-budget-deficit-climbed-2-trillion-fiscal-26/)
- American Action Forum (https://www.americanactionforum.org/insight/cbo-fy-2026-budget-deficit-totaled-2-trillion/)
- Committee for a Responsible Federal Budget (https://www.crfb.org/press-releases/cbo-estimates-20-trillion-deficit-fiscal-year-2026)
- Taxpayers for Common Sense (https://www.taxpayer.net/budget-appropriations-tax/tcs-presidents-statement-on-cbo-announcing-2-trillion-deficit-in-fy2026/)