The United States federal budget deficit reached $2 trillion during the first 11 months of fiscal year 2026, according to monthly budget data released by the nonpartisan Congressional Budget Office. That 11-month borrowing total stands roughly flat compared with the same period in fiscal year 2025, though CBO analysts noted that calendar shifts in benefit payments masked a deeper underlying expansion in the deficit.
August Deficit Contributes $168 Billion to Fiscal Year 2026 Total
For the month of August 2026 alone, the federal government ran a budget deficit of $168 billion, as reported by the Congressional Budget Office. While the cumulative 11-month shortfall appears $6 billion lower than the same period last year, the agency explained that the apparent improvement stems entirely from the timing of certain federal payments.
Because Labor Day weekend required shifts, several federal payments were pulled forward into August 2025, inflating the baseline for that prior year. According to the Congressional Budget Office, if not for those calendar distortions, the current fiscal year’s 11-month deficit would actually be $82 billion higher than the comparable period in 2025. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, noted in a public statement that the federal government has already borrowed more in the first 11 months of fiscal year 2026 than it did throughout the entirety of fiscal year 2025.
Mandatory Outlays and Debt Service Push Spending Up
Total federal spending climbed by $147 billion, or 2%, over the first 11 months of the fiscal year compared to 2025. Without timing adjustments, that spending increase reaches $235 billion, or 4%, according to the Congressional Budget Office. The growth was led primarily by mandatory spending programs and mounting interest expenses on the national debt.
- Social Security: Outlays rose by $78 billion, or 5%, driven by a larger number of beneficiaries and higher average benefit amounts.
- Medicare: Spending increased by $73 billion, or 8%, due to growing enrollment numbers.
- Medicaid: Outlays grew by $47 billion, or 8%, propelled by higher costs per enrollee.
- Interest on Debt: Net interest expenses jumped by $111 billion, or 12%, reflecting a larger national debt load and elevated long-term interest rates, though falling short-term rates slightly cushioned the rise.
- Veterans Affairs and Defense: Department of Veterans Affairs spending increased by $41 billion, or 14%, due to higher per-person costs and more benefit recipients, while Department of Defense outlays rose by $41 billion, or 5%, supporting military personnel alongside research and development.
Conversely, spending by the Department of Education dropped by $79 billion, or 56%. The Congressional Budget Office attributed that decline largely to a downward revision of $53 billion recorded in June 2026 for the estimated costs of outstanding student loans, contrasting with a $24 billion upward adjustment recorded in July 2025.
Tax Receipts Rise Despite Corporate Tax Declines
Federal tax revenues grew by 3% over the 11-month period, bringing in an additional $154 billion compared to fiscal year 2025, according to the Congressional Budget Office. Individual income tax receipts climbed by $189 billion, or 8%, while payroll taxes increased by $50 billion, or 3%. Customs duties and tariffs ticked up by $1 billion, or 1%.
Those revenue gains faced a partial offset from corporate income taxes, which dropped by $96 billion, or 25%. The agency tied the corporate tax decline to the impact of tax reforms enacted under the One Big Beautiful Bill Act of 2025.
Broader Fiscal Concerns and the $40 Trillion Debt Milestone
The widening fiscal gap coincides with broader milestones in U.S. government debt. The gross national debt recently surpassed $40 trillion for the first time, a threshold highlighted by fiscal watchdogs.
In her statement on the August budget figures, Maya MacGuineas of the Committee for a Responsible Federal Budget warned that yearly interest costs now exceed national defense spending. She added that debt held by the public exceeds the size of the entire U.S. economy, and major trust funds face insolvency within a decade unless lawmakers enact deficit-reduction measures targeting deficits down to 3% of gross domestic product.
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