U.S. federal deficit projected to reach $2.1 trillion

The Congressional Budget Office (CBO) projects that the U.S. federal deficit will reach $2.1 trillion by the end of fiscal year 2026 on September 30. This figure would exceed any previous deficit except for those recorded during the Covid-19 pandemic.

While federal revenues have increased by 3% due to higher income and payroll tax collections, federal spending has risen by 5%. Key drivers of increased spending include a 14% rise in interest on the national debt, alongside growing costs for Social Security, Medicare, Medicaid, and defense.

The CBO revised its initial $1.9 trillion deficit projection downward primarily due to lower-than-expected tariff collections following a Supreme Court ruling that struck down certain tariffs. Although new tariffs were subsequently imposed, the CBO expects total federal revenue to be $250 billion lower than originally anticipated.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, noted that the government is on track to surpass $2 trillion in borrowing despite not being in a recession, describing the trend as “not normal.”