Federal Deficit Surges to $2 Trillion in First 11 Months of FY2026, CBO Reports

David Bahnsen, founder and managing partner of The Bahnsen Group, weighed in on President Donald Trump’s economic policies as the federal deficit approached $1.8 trillion in the first ten months of fiscal 2026 during an appearance on ‘Kudlow.’

The nonpartisan Congressional Budget Office (CBO) reported that the government’s budget deficit reached $2 trillion after the first 11 months of fiscal year 2026.

Compared with the same period last year, the 11‑month shortfall was $6 billion lower. However, timing shifts surrounding Labor Day 2025 masked a larger underlying increase; without those shifts the deficit would have been $82 billion higher than last year’s shortfall.

Federal spending rose $147 billion (about 2%) versus the prior year. After adjusting for the timing effects, spending would be $235 billion (4%) higher. Tax receipts climbed $154 billion, driven by an $189 billion (8%) jump in individual income taxes, a $50 billion (3%) rise in payroll taxes and a $1 billion (1%) increase in customs duties. Corporate income taxes, however, fell $96 billion (25%) following the 2025 tax reforms under the One Big Beautiful Bill Act.

The growth in outlays was propelled primarily by mandatory programs—Social Security, Medicare and Medicaid—and by a $111 billion (12%) surge in interest payments on the national debt.

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The U.S. budget deficit reached $2 trillion in the first 11 months of fiscal year 2026, according to the CBO. (J. David Ake/Getty Images)

Social Security benefits spending increased $78 billion (5%) due to higher average benefits and more recipients. Medicare outlays rose $73 billion (8%) as enrollment grew, while Medicaid spending climbed $47 billion (8%) because of higher per‑enrollee costs.

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Interest expense on the national debt jumped $111 billion (12%) as the debt burden expanded and long‑term rates rose, though declines in short‑term rates partially offset the overall increase.

Veterans Affairs spending climbed $41 billion (14%) owing to more beneficiaries and higher per‑person costs. The Department of Defense saw a $41 billion (5%) rise, driven by higher personnel and research‑and‑development expenditures.

US NATIONAL DEBT HITS $40 TRILLION MILESTONE FOR FIRST TIME EVER

Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, said the government’s borrowing this year has already surpassed last year’s total and may climb further in September, the final month of FY2026. She warned that “such extraordinarily high deficits are just one piece of our fiscal situation that is falling apart. The gross national debt recently hit the sobering milestone of $40 trillion; we’re now spending more on yearly interest costs than on our national defense; debt held by the public exceeds the size of our entire economy; and trust funds for programs that tens of millions of Americans rely on face insolvency in less than a decade,” MacGuineas said.

“It is clear that we have delayed the hard choices for far too long,” she added. “If lawmakers want to fix our laundry list of issues, they should come together and agree to a plan to target reducing deficits to 3% of GDP – half their current level – and get to work on shoring up our trust funds. If not, we risk leaving future generations with damage that can’t be undone.”

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