The Congressional Budget Office (CBO) released its monthly budget review for June, revealing that the US federal budget deficit for FY2026 reached $1.373 trillion through the first nine months of the fiscal year, marking a $35 billion increase compared to the same period last year [1]. This widening deficit is attributed to federal spending outpacing tax revenue growth, with spending rising by $178 billion year-over-year while tax receipts increased by $142 billion [1].
The primary drivers of increased spending were the cost of servicing the national debt, which now exceeds $39 trillion, and higher expenditures on Social Security, Medicare, and Medicaid [1]. Net interest payments on the national debt rose by $98 billion, or 13%, compared to the previous year, due to both the larger debt load and higher long-term interest rates, though some declines in short-term rates provided partial relief [1]. Social Security payments increased by $62 billion (5%), Medicare by $58 billion (8%), and Medicaid by $49 billion (10%), all driven by higher enrollment, increased benefits, and rising costs per enrollee [1].
On the revenue side, individual income and payroll tax receipts grew by $169 billion (5%), despite a $31 billion (10%) rise in income tax refunds linked to the One Big Beautiful Bill Act [1]. Customs duties, including tariffs, surged by $55 billion (51%) due to executive actions raising tariffs, but a Supreme Court ruling in February led to $70 billion in tariff refunds being paid out in May and June, reducing overall tariff revenue [1].
The CBO projects that the federal budget deficit could reach $2 trillion for the fiscal year, which would rank among the largest in US history [1]. The US national debt has now surpassed the size of the economy for the first time since World War II, underscoring the scale of fiscal challenges facing policymakers [1].
CONCLUSION
The US federal budget deficit is accelerating, driven by rising debt interest payments and entitlement spending, and is projected to approach $2 trillion in FY2026. With the national debt exceeding $39 trillion and outpacing economic growth, the fiscal outlook remains a significant concern for markets and policymakers.