Federal Deficit Nears $2 Trillion in Fiscal 2026

The federal budget deficit climbed to nearly $2 trillion in the fiscal year that ended Sept. 30, the largest shortfall since 2021, the Congressional Budget Office reported.

The $1.993 trillion deficit was 12% higher than the prior year, according to the office. The government spent about $7.4 trillion, up 6%, while revenue rose 3% to about $5.4 trillion, figures reported by The Wall Street Journal.

The final number amounted to more than 6% of gross domestic product, the Journal reported, though the full-year GDP figure has not been released. That compares with 5.8% the year before and a 50-year average of 3.8%.

The size stands out because the economy is years into an expansion. Deficits of this size usually arrive during recessions or wars, not during growth with low unemployment, budget analysts noted.

Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, told the Journal that running $2 trillion deficits in a growing economy with low unemployment is an unsustainable trend.

Why it matters for households comes down to borrowing. Deficits must be financed by selling government debt, and more borrowing means more competition for credit. That can push up the interest rates ordinary families pay on mortgages, auto loans and credit cards.

The debt load is growing fast. The Congressional Budget Office projects federal debt held by the public at about 101% of GDP this year, rising to 120% by 2036.

Interest costs are already a major budget pressure. The office projects net interest costs rising from 3.3% of GDP this year to 4.6% in 2036, a growing claim on tax revenue that leaves less room for everything else the government funds.

The final deficit also came in above expectations. The office’s February baseline had projected a $1.9 trillion shortfall for the year, and under that baseline annual deficits keep growing toward $3.1 trillion by 2036.