Deficit Hits $1.8 Trillion in First 10 Months of Fiscal Year
Happy Monday! July was the hottest month ever recorded in the contiguous United States, according to the National Oceanic and Atmospheric Administration. Temperatures across the 48 states averaged 76.9 degrees Fahrenheit, topping a previous high set back in July 1936. The temperature data go back 132 years, to 1895. "If we're exceeding records from The Dust Bowl, that says that we're in deep trouble," meteorologist Jeff Masters of Yale Climate Connections told the Associated Press. Andrew Pershing, a climate scientist at the nonprofit Climate Central, offered Bloomberg a troubling prediction: "In a few years, this will feel like a cool July."
Here's what else you should know tonight.
Deficit Hits $1.8 Trillion in First 10 Months of Fiscal Year, Will Top $2 Trillion, CBO Says
The federal budget deficit came to an estimated $1.8 trillion in the first 10 months of the fiscal year, according to the latest monthly analysis from the Congressional Budget Office.
The total is $169 billion larger than the deficit recorded over the same period last year. Revenues from October through July rose $139 billion, or 3%, but outlays rose $308 billion, or 5%.
As always, the timing of weekends and holidays affected the deficit number. If the calendar in 2026 had been the same as in 2025, the 10-month deficit would have been $1.7 trillion, about $71 billion higher year-over-year.
Based on the latest data, CBO now estimates that the deficit for the full 2026 fiscal year will come to $2.1 trillion - a $200 billion jump from the estimate CBO issued in February. Much of that gap is related to the loss of revenues following the Supreme Court's rejection of much of President Trump's tariff policy.
Those lost revenues, combined with the cost of refunding some of the illegal tariffs collected earlier in the year, helped push the monthly deficit number to $431 billion in July.
The deficit hawks at the Committee for a Responsible Federal Budget expressed dismay over the latest numbers. "We're on track to surpass $2 trillion in borrowing this fiscal year despite not being in a recession. That is not normal," CRFB's Maya MacGuineas said in a statement. "Incredibly, such an enormous level of borrowing barely scratches the surface of our fiscal deterioration. We are about to hit the sobering milestone of $40 trillion in gross national debt, and things are only likely to get worse."
Senate Passes Funding Stopgap, Leaves Other Work Unfinished Before Recess
The Senate wrapped up its work for August in the pre-dawn hours of Saturday morning and departed for a five-week recess after punting on some of Republicans' top priorities. That leaves lawmakers with a lot to do when they return from their summer break - and some political concerns to worry about as they look ahead to November.
Before senators left for their recess, they managed to advance a Russia sanctions bill; confirm a package of 74 nominations; approve a stopgap bill funding the government from October through December 11; and confirm Todd Blanche as attorney general in a 50-49 vote. They also failed to advance a voter ID bill. And they put off what would have been a failed vote on a third budget reconciliation bill with money for the military, farm aid and election changes.
Then they adjourned at 4:56 a.m. Saturday, leaving their unfinished business, including a bill reforming college sports NIL rules and a sweeping cryptocurrency measure, on hold until September 14 at the earliest.
President Trump reportedly signed off on the decision to delay a vote on the election measures he has been demanding. Even so, Politico reports that some Republicans "are prepared for the mercurial president's yearslong obsession with the election measure to resurface over the five-week recess and risk further inflaming the party's base just months before GOP senators need those same voters to turn out.
Looking to avoid a pre-election shutdown: The Senate voted 90-6 to approve a stopgap funding bill, known as a continuing resolution, stretching from the start of the new fiscal year on October 1 until December 11.
The House had passed its own bill, which extended funding through December 4, before it started its summer break. To avert a shutdown, both chambers will need to pass the same spending stopgap before the deadline at the end of September.
Unlike the House-passed bill, the bipartisan Senate version makes some adjustments to current funding levels and temporarily blocks a Trump administration plan that would give political appointees control over federal grants. Lawmakers are expected to resume a fight over that grant issue after they return from recess, as both Democrats and some Republicans object to the administration changes.
The Senate bill also includes language preventing the Trump administration's immigration enforcement agencies from getting additional money as part of the stopgap spending bill. That could lead some House Republicans to object to the Senate measure.
The White House said earlier this month that it supports the Senate bill.
"This bill would proactively provide additional time for the full-year appropriations process to continue moving forward while preventing another dangerous shutdown that harms hardworking families and forces Federal employees to go without pay," the Office of Management and Budget said in a statement of administration policy. "President Trump strongly opposes another futile Government shutdown. Every Member of Congress should support passage of this CR to keep the Government open as discussions on full-year appropriations continue."
Reconciliation 3.0 on hold: Senate Republicans last week unveiled their budget framework for a third reconciliation package but did not vote on it given the expectation that a vote would fail. That leaves the GOP plan to provide more money for the Iran war and farm aid in limbo, likely until after the November elections - and leaves President Trump's push for new voter restrictions entirely unresolved.
Senate Republicans are set to return to the Capitol on September 14 and are reportedly expected to revise the blueprint they released last Friday. Even so, they may not take up the budget plan for fear that the reconciliation process they are using to bypass the threat of a Democratic filibuster would open them up to a series of sensitive amendment votes from Democrats just weeks before voters cast their ballots.
The bottom line: Congress has plenty of work left to do, even just to avoid a government shutdown in October (not to mention full-year funding for fiscal year 2027). But the House isn't scheduled to be back until the end of the month, and the Senate is slated to be out until mid-September.
Chart of the Day: GOP Losing Grip on Economy
Republicans usually hold the upper hand among voters when it comes to managing the economy, but persistent worries about the cost of living under President Trump are eroding the GOP's advantage. For the first time in 15 years, a Fox News poll highlighted by The Wall Street Journal found more registered voters saying they trust Democrats over Republicans to do a good job on the economy.
The results reflect growing disenchantment with Trump's handling of the economy. During his first term, Trump maintained a positive net rating on the economy for all but a few weeks. In his second term, he has been under water the entire time.
Although some measures of the economy such as the stock market and the low unemployment rate look remarkably bright, a significant number of voters report a sour mood on economic issues, due in larger part to persistent inflation and high prices for basics like fuel and groceries. If that mood remains, Democrats could score major wins at the polls in November.
"If Democrats could sustain leads on the economy and win double digit margins among independents as some polls show, a Blue Wave is possible," Republican strategist David Winston said, per the Journal.
Number of the Day: 300 Million
The total amount of crude oil held in the U.S. Strategic Petroleum Reserve has fallen below 300 million barrels for the first time in more than four decades, the Department of Energy reported Monday.
The inventory of sweet and sour crude held in reserve totaled 298.7 million barrels as of August 7, a drop of 6.1 million barrels from the previous week, according to departmental data. The oil reserve, which was created in 1975 in response to the 1973 Arab oil embargo, now stands at its lowest level since January 1983, per CNBC.
The oil reserve contained about 415 million barrels before the United States and Israel launched a war against Iran on February 28, a decision that led to the closure of the Strait of Hormuz and the loss of a significant portion of the world's oil supply. In January, before the start of the war, the oil reserve grew by 1.7 million barrels. Starting in March, after President Trump ordered oil to be released, the reserve began to shrink every month. The total volume is expected to fall to about 243 million barrels.
Not every barrel in the reserve of oil is available for use. Aging infrastructure prevents all of the oil from being withdrawn, and according to some analyses, the reserve system must hold back a minimum of about 100 million barrels in order to function properly.
Fiscal News Roundup
- Trump Makes Sweeping New Demands on Iran as Deal Hopes Dim – Bloomberg
- Senate GOP Braces for a Trump August Pressure Cooker – Politico
- Senate Passes Funding Bill to Avert October Shutdown – Politico
- Pentagon Pushing Defense Contractors to Speed Up Weapons Production – The Hill
- Hegseth Can't Persuade Republicans to Back His Big Budget – Politico
- Washington Grapples With a National Guard Deployment Extended Until 2029 – Associated Press
- Trump Administration Revokes More Than 175,000 Visas – The Hill
- Vulnerable Battleground Dem Embraces 'No Tax on Tips' After Voting Against Trump Bill – Fox News
- Todd Blanche Is Sworn In as Attorney General After Bruising Confirmation Fight – Associated Press
- Trump Extends Jones Act Waiver 90 Days for Foreign Ships Moving Energy, Fertilizers – Associated Press
- Trump Signs Order to Reduce Childhood Vaccines, Repeats Unfounded Autism Link – Wall Street Journal
- Cassidy Blasts Vaccine Order, Saying Trump Has No 'Expertise to Make These Changes' – The Hill
- Judge Orders Pause of Mamdani's Pied-à-Terre Tax Rollout After Homeowners Sue – CNN
- Democrats Are Blaming Each Other Over Minnesota's Welfare Fraud Scandal – Wall Street Journal
Views and Analysis
- The Republican Party Is Losing Its Edge With Voters on the Economy – Aaron Zitner and Justin Lahart, Wall Street Journal
- Trump Has a Carter-Style Iran Problem as the Economy Drags Before the Midterms – Stephen Collinson, CNN
- Republicans Face Likely Year-End Test After Punting Trump Spending Bill – Jordain Carney, Politico
- Musk's DOGE Set Back the Cause of Leaner Government – Washington Post Editorial Board
- Tariffs on Canada Over Wildfires Would Fan the Flames of the Problem – Cullen S. Hendrix, Peterson Institute for International Economics
- How Kevin Warsh Is Rewiring the Fed – Neil Irwin, Axios
- Tax Freedom Day, Europe vs. US – Wall Street Journal Editorial Board
- Government Unions Spend Millions to Save Washington Millionaire's Tax – Washington Post Editorial Board
- Modernizing Government Technology Is Starting to Pay Off - Let's Keep Going – Rep. James R. Walkinshaw (D-VA), The Hill
- A Welcome Trump Restart for Head Start – Wall Street Journal Editorial Board
- Lower Drug Prices Without Killing Innovation – Darshak Sanghavi, Wall Street Journal