CBO: Federal Deficit Nearly $2 Trillion in Fiscal 2026; Debt Held by Public Hits 100% of GDP

The federal budget deficit climbed to nearly $2.0 trillion in fiscal 2026, up 12% from a year earlier, while debt held by the public reached 100% of gross domestic product, the highest level since 1946, according to a Congressional Budget Office report released Monday.

The nonpartisan congressional budget scorekeeper said in its “Monthly Budget Review: Summary for Fiscal Year 2026” that the deficit for the year ended Sept. 30 totaled $1.992 trillion. “In fiscal year 2026, which ended on September 30, the federal budget deficit totaled $2.0 trillion—an increase of $217 billion (or 12 percent) from the deficit recorded in the previous year,” CBO said.

The basic math was straightforward: federal spending continued to grow faster than tax and other revenue. Total outlays rose to $7.396 trillion, up $386 billion, or about 5.5%, from fiscal 2025. Total receipts increased to $5.403 trillion, up $169 billion, or 3.2%.

Measured against the size of the economy, the deficit equaled 6.2% of GDP, up from 5.8% in fiscal 2025. CBO said that was well above the 50-year average of 3.8% of GDP.

On the spending side, some of the biggest increases came from major benefit programs and from the government’s borrowing costs. Net interest outlays reached $1.142 trillion, up $114 billion, or 11%, crossing the $1.1 trillion mark. CBO said that increase mainly reflected a larger stock of federal debt and higher long-term interest rates, partly offset by lower short-term rates.

Social Security spending rose to $1.654 trillion, up $86 billion. Medicare outlays increased to $1.069 trillion, up $77 billion. Medicaid spending climbed to $723 billion, up $55 billion.

The final deficit also came in higher than CBO had expected earlier this year. Compared with the agency’s February 2026 baseline, the fiscal 2026 deficit was $140 billion larger. CBO said revenues were $193 billion lower than projected, while outlays were $53 billion lower than projected.

Receipts were mixed across major categories. Individual income tax collections rose to $2.846 trillion, up $189 billion, and payroll tax receipts increased to $1.812 trillion, up $64 billion. But corporate income tax receipts fell to $381 billion, down $71 billion. CBO said that decline was partly tied to a scheduled decrease in one-time repatriation payments and to provisions in the 2025 reconciliation act that allowed larger investment deductions.

Customs duties also fell, dropping to $173 billion, down $22 billion from the prior year. CBO said U.S. Customs and Border Protection refunded about $126 billion in duties plus interest during 2026 related to tariffs imposed beginning in 2025.

The budget office tied part of that decline to a Feb. 20, 2026, Supreme Court ruling in Learning Resources, Inc. v. Trump. The court held that the International Emergency Economic Powers Act did not authorize the president to impose tariffs.

The broader debt picture also worsened. Debt held by the public — a common measure of federal debt that excludes intragovernmental holdings — reached 100% of GDP at the end of fiscal 2026, up from 99.0% a year earlier. CBO said that was the highest share since the end of World War II.

Historically, the shortfall was unusually large. CBO said a deficit equal to 6.2% of GDP has been matched or exceeded only eight times since 1946: from 2009 through 2012, in 2020 and 2021, and again in 2023 and 2024. That leaves fiscal 2026 as another year in which the federal government ran a deficit far above the long-run norm, driven by spending growth that outpaced revenue gains and by a steep rise in interest costs.