US Domestic — 2026-07-11

FY2026 Federal Budget Deficit Outpaces Prior Year Pushing Toward 2 Trillion Dollars

BLUFRising net interest and entitlement costs will likely push the FY2026 deficit past $2 trillion by November, compressing the legislative runway to address trust fund shortfalls before they force action.

The Congressional Budget Office reported in its June Monthly Budget Review that the FY2026 federal deficit reached $1.373 trillion through the first nine months of the fiscal year, $35 billion above the same period in FY2025 12. Federal spending rose $178 billion year-over-year while tax receipts rose $142 billion, with net interest on the national debt the largest driver, up $98 billion, or 13%, followed by increased Social Security, Medicare and Medicaid outlays 1. Customs duty revenue rose 51%, or $55 billion, which CBO attributed to tariffs imposed by President Trump, though tariff refunds following a Supreme Court ruling cut receipts by about $70 billion in May and June 1. June alone produced a $126 billion deficit versus a $27 billion surplus in June 2025, as monthly outlays climbed $122 billion year-over-year while revenues fell $32 billion 1. Committee for a Responsible Federal Budget president Maya MacGuineas said in a statement that the deficit has now surpassed last year's and is likely to remain higher through the rest of the fiscal year, with total FY2026 borrowing projected at $2 trillion or more 3.

Analysis
The FY2026 deficit will likely reach or exceed $2 trillion by CBO's final-year accounting in mid-November, as net interest and entitlement growth continue outpacing tax receipts even after tariff-driven customs gains are netted against Supreme Court-ordered refunds. Sustained growth narrows the window for Congress to address Social Security and Medicare shortfalls before trust fund exhaustion becomes a near-term legislative deadline rather than a distant projection, and if the deficit clears $2 trillion, Treasury issuance plans and any FY2027 reconciliation package face added pressure to confront entitlement spending. The acceleration may instead be partly a timing artifact of refunds concentrated in May and June rather than structural spending growth. Confidence is moderate, given reliance on a single primary CBO release with remaining-quarter trajectories sensitive to tariff litigation and interest-rate movements.

3 sources

National debt interest and entitlement spending push FY2026 federal budget deficit toward $2 trillion - Fox Business
Monthly Budget Review: June 2026 - Congressional Budget Office
CBO Estimates FY 2026 Deficit Overtakes 2025, Totals $1.4 Trillion - Committee for a Responsible Federal Budget