The federal budget deficit came to $2.0 trillion in the 2026 fiscal year, the Congressional Budget Office estimated Thursday.
The CBO’s final projection for the fiscal year, which ended in September, is $218 billion more than the annual deficit recorded last year. Revenues for the year rose by $169 billion, or 3%, but outlays climbed considerably more, up $386 billion, or 6%.
The increase in revenues, which totaled $5.4 trillion, was driven by larger collections of individual income and payroll taxes, which jumped by $255 billion, or 6%. Collections of corporate income taxes fell by $70 billion, or 16%, due in large part to the more generous tax write-offs for investments provided by the 2025 Republican reconciliation bill.
Outlays in fiscal year 2026 were $7.4 trillion, according to the CBO estimate. Spending on the three largest mandatory programs — Social Security, Medicare and Medicaid — rose by $217 billion, or 7%. Driven by a larger total debt and higher interest rates, outlays for net interest on the public debt rose by $115 billion, or 11%. Defense spending rose by $48 billion, or 5%.
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.
The fiscal hawks at the Concord Coalition repeated their call for the creation of a fiscal commission to tackle the issue. “We finished the fiscal year with debt held by the public as large as our entire economy and net interest on the debt set a record at $1.1 trillion, consuming over 20% of federal tax dollars,” Concord Action Executive Director Carolyn Bourdeaux said. “Without decisive and prompt action, the problem is only going to get worse.”