Budget Deficit

The Federal Government Just Posted the Largest Annual Budget Deficit Since COVID

Tax revenue increased by about 3 percent last year, but spending increased twice as fast. And interest payments on the debt cost more than $1.1 trillion.

Eric Boehm | 10.9.2026 1:00 PM

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(Congressional Budget Office/Robert Findlay/Splosh/Dreamstime)

The federal budget deficit totaled nearly $2 trillion for the fiscal year that ended on September 30—the third-largest in American history, trailing only the two deficits recorded during the COVID-19 pandemic.

The fiscal year totals released Thursday by the Congressional Budget Office (CBO) paint another bleak picture about the state of the federal budget. That near-record deficit occurred despite tax revenue increasing by about 3 percent year over year. The federal government collected more than $5.4 trillion in taxes during the past fiscal year.

However, the government spent about $7.4 trillion, a 6 percent increase from the year before. That's why the deficit widened.

That spending increase was primarily driven by entitlement programs, the military, and interest payments on the national........

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