The US federal budget deficit reached $2 trillion in the first 11 months of the 2026 fiscal year, according to figures from the non-partisan Congressional Budget Office (CBO), leaving the government with one month still to run before the year ends.
The shortfall was $6 billion lower than at the same point last year on an unadjusted basis. However, the CBO said the comparison was distorted by federal payments moved into August 2025 because September 1 fell on the Labor Day holiday; after accounting for that timing change, this year’s deficit was $82 billion larger.
The figures, published on September 9, showed that federal receipts increased by $154 billion, or 3 per cent, to $4.8 trillion between October and August. Spending rose by $147 billion, or 2 per cent, to $6.8 trillion, although the increase would have been $235 billion, or 4 per cent, without the payment shifts.
Mandatory spending and interest costs drive deficit
Higher outlays were concentrated in major entitlement programmes and the cost of servicing the national debt. Social Security spending increased by $78 billion, Medicare rose by $73 billion and Medicaid by $47 billion.
Net interest payments climbed by $111 billion, or 12 per cent, as the government carried more debt and faced higher long-term borrowing costs. Lower short-term interest rates helped to limit the overall increase.
Spending by the Department of Veterans Affairs rose by $49 billion, or 14 per cent, while military spending increased by $41 billion, or 5 per cent, driven largely by personnel costs and research and development.
Outlays by the Department of Education fell by $79 billion, although the CBO said the decline was mainly linked to changes in the estimated cost of outstanding student loans rather than a broad reduction in federal commitments.
August alone produced a deficit of $168 billion, the CBO estimated. That was $177 billion less than the shortfall recorded in August 2025, but the agency said the deficit would have been $10 billion larger than a year earlier once payment-timing effects were removed.
Tax receipts rise as corporate revenues fall
Individual income tax receipts increased by $189 billion, or 8 per cent, while payroll tax revenues rose by $50 billion, or 3 per cent. Customs duties, including tariffs, were up by $1 billion, or 1 per cent, over the same period.
Those gains were partly offset by a $96 billion, or 25 per cent, fall in corporate income tax receipts. The CBO attributed the decline to provisions in the 2025 reconciliation legislation that allowed companies to claim larger deductions for certain investments.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the US had already borrowed nearly $2 trillion with one month remaining in the fiscal year, exceeding the amount borrowed during the whole of 2025.
“Such extraordinarily high deficits are just one piece of our fiscal situation that is falling apart,” Ms MacGuineas said, pointing to the $40 trillion national debt, rising interest costs and the pressure facing federal trust funds.
She said lawmakers had delayed difficult decisions for too long and urged them to agree on a plan to reduce deficits to 3 per cent of gross domestic product, warning that failure to act could leave future generations with “damage that can’t be undone”.
