The fiscal year deficit for the federal government will be $200 billion more than the Congressional Budget Office (CBO) initially projected, the federal agency revealed Monday.
In its monthly budget review, the CBO projected the fiscal 2026 federal deficit will be $2.1 trillion. In February, it projected the deficit would be $1.9 trillion.
The change is “mostly” driven by U.S. Customs and Border Protection (CBP) collecting a “smaller-than-expected” amount in tariff duties, after the Supreme Court in February struck down levies President Trump imposed under the International Emergency Economic Powers Act, the budget office noted.
While Trump has implemented new import taxes under Section 122, and later Section 301, of the Trade Act of 1974, the CBO estimated that all tariffs and customs duties collected in 2026 will be roughly $250 billion below earlier projections.
As of July 31, CBP had refunded about $100 billion of the roughly $166 billion it collected in tariff duties, according to a court filing.
Through the first 10 months of the fiscal year, federal revenues for fiscal 2026 increased by $139 billion relative to the same period of fiscal 2025, officials estimated. Federal outlays increased by $308 billion, with roughly 32 percent of the rise driven by a shift in the timing of certain payments.
“Payments that otherwise would have been due on August 1, which fell on a weekend, were shifted into July,” the CBO report stated. “If not for those shifts, the deficit thus far would have been $1.7 trillion, $71 billion more than the shortfall for the same period in fiscal year 2025.”
When accounting for the timing adjustments, federal outlays from October through July were more than $6.2 trillion, an increase of $209 billion relative to fiscal 2025.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, called the $1.8 trillion federal deficit over the first 10 months of the fiscal year “astounding.”
MacGuineas said in a Monday statement, “We’re on track to surpass $2 trillion in borrowing this fiscal year despite not being in a recession. That is not normal.”
Higher spending on Social Security, Medicare and Medicaid benefits accounted for roughly 86 percent of the yearly rise in outlays, with the report citing multiple reasons — such as an increase in the number of Social Security beneficiaries, increased enrollment in Medicare and higher costs per Medicaid enrollee, according to the data.
The Trump administration in June projected Social Security’s Old-Age and Survivors Insurance Trust Fund will be able to cover all scheduled benefits only until the final quarter of 2032, upon which time it will only pay 78 percent of benefits.
That notice has sparked a variety of proposals from lawmakers to address the social program’s fiscal future, from lifting the cap on payroll taxes to a plan from Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) to invest $1.5 trillion in a fund to cover the program’s unfunded liability.
Spending by individual federal agencies also changed year-over-year, according to the CBO. But the largest fluctuation for outlays was the $117 billion increase in net interest paid on the public debt.
Budget officials pointed to the increasing debt, which is roughly $39.8 trillion, and higher long-term interest rates for the change, which declines in short-term rates “partially mitigated.”
As for revenues, rising wages and salaries contributed to an increase of $141 billion in money withheld from workers’ paychecks. Receipts from corporate income taxes decreased by $89 billion, as the One Big Beautiful Bill Act gave corporations the ability to “take larger deductions for certain investments,” the report stated.
