The federal budget deficit ballooned to $2 trillion in the fiscal year that ended Sept. 30, compared to $1.8 trillion last year, according to a new report.
The deficit rose 12%, according to the Congressional Budget Office’s Thursday report.
The federal government’s cumulative deficit for fiscal year 2026 totaled $1.2 trillion at the end of May, CBO estimated, about two-thirds through the fiscal year. At the time, it was $116 billion less than at the same point a year earlier, mostly because of shifts in the timing of payments.
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CBO estimated that spending rose faster than revenues, $386 billion compared to $169 billion, respectively.
While revenue increased by about 3% from 2025, government spending rose 6%.
Spending increased for net interest on the debt, defense and major benefit programs, according to the report.
Net interest rose 11% to about $1.14 trillion, and defense spending rose 5%. Medicare increased by $77 billion, Medicaid by $55 billion and Social Security by $86 billion.
The U.S. collected $5.4 trillion in the 2026 fiscal year as collections of individual income and payroll taxes rose, while collections of corporate income taxes and customs duties declined.
Receipts from corporate income taxes decreased by 16%, attributed to the GOP’s One Big Beautiful Bill Act, which allows corporations to take larger deductions for certain investments, according to the report
Customs revenue declined by 11% because the Trump administration refunded approximately $130 billion in tariffs collected under the International Emergency Economic Powers Act, according to CBO, after the Supreme Court ruled in February that the law does not authorize those tariffs.
Customs duties fell 83% in September alone compared with September 2025, mostly because of refunds.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said that instead of “following the same broken pattern, policymakers should set a fiscal new year’s resolution to fix our unsustainable fiscal situation.”
“Clearly, we can’t keep going like we have,” she said in a statement. “Our fiscal path has been running backwards for far too long; it’s time to start working on the path forward.”
Taxpayers for Common Sense President Steve Ellis dubbed Thursday’s fiscal news “bad” and “entirely predictable.”
“Congress and the administration chose to make an already unsustainable budget worse, then promised taxpayers the numbers would somehow work out,” he said in a statement. “CBO’s report shows the consequences of those choices.”
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