Heritage Foundation Chief Economist EJ Antoni joins Mornings with FOX Business to analyze the Congressional Budget Office report showing the federal budget deficit approaching $2 trillion in fiscal year 2026 and reports on annualized revenues from technology companies.
The federal government’s budget deficit totaled $2 trillion in fiscal year 2026, as the cost of servicing the national debt of more than $40 trillion increased.
The nonpartisan Congressional Budget Office (CBO) released data Thursday showing the federal budget deficit reached $1.993 trillion in fiscal year 2026, which ended at the end of September.
This figure represents an increase of $218 billion from the fiscal year 2025 deficit of $1.775 trillion, an increase of 12%.
While federal tax revenues increased 3% to more than $5.4 trillion in fiscal year 2026, revenue growth was outpaced by the 6% increase in federal spending, which totaled nearly $7.4 trillion according to preliminary CBO data for fiscal year 2026.
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The budget category that saw the largest increase in spending in fiscal year 2026 was net interest spending on the national debt, which increased by $115 billion, or 11 percent, from last year. The increase is because the national debt was larger last year than it was in fiscal 2025 and long-term interest rates were higher.
Spending on Social Security benefits also increased by $86 billion, or 5 percent, due to increases in average benefits and the number of recipients. The CBO noted that the increase would have been larger without a significant package of one-time retroactive payments under the Social Security Fairness Act.
Medicare spending increased by $77 billion, or 8 percent, due to increased enrollment and higher payment rates; while Medicaid spending also increased by $55 billion, or 8 percent, due to rising costs per enrollee.
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The federal budget deficit reached $2 trillion in fiscal year 2026, the CBO said. (Kevin Carter/Getty Images)
War Department spending on military activities was $48 billion, or 5 percent, more than in fiscal 2025 – the largest increases were in spending on research and development and military personnel.
Department of Education spending increased by $41 billion, or 117 percent, largely due to differences in the amounts recorded for the estimated costs of unpaid student loans. A $131 billion reduction was recorded in September 2025 due to changes to the One Big Beautiful Bill Act (OBBBA) program – and the 2026 change was significantly smaller, resulting in a year-over-year increase.
The largest increases in tax revenue came from personal income and payroll taxes, which increased by $255 billion, or 6 percent, from the previous year. Amounts withheld from workers’ wages increased by $168 billion, or 5 percent, while unwithheld payments increased by $108 billion, or 9 percent.
This was partially offset by higher personal income tax refunds, which increased by $16 billion, or 5%, in the last fiscal year due to the OBBBA provisions.
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Tax revenues from the corporate income tax decreased by $70 billion, or 16 percent, due to larger deductions for certain OBBBA investments, which reduced some payments and offset revenue increases that would otherwise have been expected.
Tariff collections, including customs duties, decreased by $22 billion, or 11%, in fiscal year 2026 compared to the previous year. The CBO noted that larger amounts were collected at the start of fiscal year 2026, but began to decline in May when the Trump administration began issuing refunds after the Supreme Court struck down IEEPA’s tariffs.
Maya MacGuineas, chair of the nonpartisan Committee for a Responsible Federal Budget, said in a statement that the fiscal 2026 deficit “ranks among the highest deficits in our history — and the highest ever recorded outside of war or recession.”
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“A new fiscal year is an opportunity for change, and while it isn’t always easy, it is necessary. Policymakers can start by adopting an achievable goal – such as reducing deficits to 3 percent of the economy, or about half of what they are today – and committing to achieving it, which can be done through a bipartisan budget commission that reviews all areas of the budget,” MacGuineas added.
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