CBO Projects 2026 Federal Deficit Will Hit $2.1 Trillion

The Congressional Budget Office projects the U.S. federal deficit will reach $2.1 trillion by the end of fiscal year 2026 on September 30. This figure represents a $200 billion increase over the agency's February estimate of $1.9 trillion and exceeds the previous non-pandemic peak of $1.8 trillion.

The widening gap stems largely from a February 20 Supreme Court ruling that invalidated President Donald Trump's tariff program under the International Emergency Economic Powers Act. This decision, along with orders from the U.S. Court of International Trade, triggered approximately $100 billion in refunds to companies. In July 2026 alone, the government issued $36 billion in refunds while collecting only $26 billion. To recoup these losses, the administration shifted to tariffs under Section 122 of the Trade Act of 1974 and Section 301.

Spending has grown by 5%, outstripping a 3% rise in revenues. Primary drivers include a 14% increase in interest on the national debt, which has now reached $40 trillion, alongside rising costs for Social Security, Medicare, and Medicaid. Annual interest payments now exceed $1 trillion and could eventually surpass Social Security spending. Further pressure is expected as President Trump has requested a 19% increase in discretionary spending for the coming year.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, described the borrowing levels as astounding and urged lawmakers to establish a bipartisan commission to target deficits at 3% of GDP.