Federal Deficit Hits $2 Trillion in FY2026, CBO Reports

WASHINGTON, The federal government ran a $2.0 trillion deficit in fiscal year 2026, the Congressional Budget Office said Thursday, marking the largest shortfall outside a war or recession in the nation's history.

<cite index="10-1">The deficit was $218 billion more than the deficit recorded in fiscal year 2025.</cite> <cite index="14-7,14-8">The CBO put the precise figure at $1.993 trillion, a 12 percent increase from the $1.775 trillion shortfall in fiscal year 2025.</cite>

<cite index="17-5,17-6">The FY2026 deficit was the net effect of $7.4 trillion in spending and $5.4 trillion in revenue collections.</cite>

<cite index="10-3">Although revenues rose by $169 billion, or 3 percent, outlays rose more, by an estimated $386 billion, or 6 percent.</cite> <cite index="12-5">The revenue increase was driven by larger collections of individual income and payroll taxes, which jumped by $255 billion, or 6 percent.</cite>

<cite index="12-6">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>

On the spending side, the drivers were broad. <cite index="12-8">Spending on the three largest mandatory programs, Social Security, Medicare and Medicaid, rose by $217 billion, or 7 percent.</cite> <cite index="15-9">Medicare increased by $77 billion, Medicaid by $55 billion and Social Security by $86 billion.</cite> <cite index="12-9">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.</cite> <cite index="12-10">Defense spending rose by $48 billion, or 5 percent.</cite>

<cite index="16-5">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>

<cite index="18-7">Before 2026, the deficit had exceeded $2 trillion only in the pandemic years of 2020 and 2021.</cite>

Budget watchdogs pushed back hard. <cite index="12-11,12-12">Budget experts said the large deficit is unusual given current economic conditions. "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="17-5">The deficit also came in $140 billion above the $1.9 trillion shortfall the CBO had projected in its latest baseline, according to the American Action Forum.</cite>

<cite index="18-8,18-9">Based on current law, the CBO projects the deficit will hit $3 trillion within a decade, reaching $8 trillion by 2055, a baseline that assumes no new recessions, wars, tax cuts, or spending programs, and also assumes interest rates on the debt stay indefinitely below where they currently are.</cite>

The White House did not immediately respond to a request for comment. The Treasury Department is expected to release its own final tally for FY2026 later this month.

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)
- Fox Business (https://www.foxbusiness.com/politics/federal-budget-deficit-hits-2t-national-debt-costs-surge)
- Committee for a Responsible Federal Budget (https://www.crfb.org/press-releases/cbo-estimates-20-trillion-deficit-fiscal-year-2026)
- American Action Forum (https://www.americanactionforum.org/press-release/cbo-fy-2026-budget-deficit-totaled-2-trillion/)
- National Review (https://www.nationalreview.com/corner/the-federal-deficit-is-now-2-trillion/amp/)
- The Washington Times (https://www.washingtontimes.com/news/2026/oct/8/federal-budget-deficit-climbed-2-trillion-fiscal-26/)