CBO estimates federal deficit reached $1.4 trillion through first nine months of fiscal 2026

By Brian Bateman

The federal budget deficit reached an estimated $1.4 trillion during the first nine months of fiscal 2026, according to a Congressional Budget Office report released July 9. The figure is $35 billion higher than the deficit recorded during the comparable period of fiscal 2025.

The update is the latest official midyear measure of federal finances before the fiscal year ends on September 30. It shows that federal revenues increased, but outlays grew by more in dollar terms, leaving the government with a larger cumulative shortfall than at the same point last year.

Revenues rose, but outlays grew more

CBO said revenues increased by $142 billion, or 4%, during the first nine months of fiscal 2026. Outlays increased by $178 billion, or 3%.

The figures are estimates based on information from the U.S. Department of the Treasury. They describe the budget’s performance through the first nine months of the fiscal year; they are not a final accounting for all of fiscal 2026.

The difference between the revenue and outlay changes helps explain why the deficit was higher despite stronger receipts. Revenue growth reduced the gap relative to what it otherwise might have been, but the increase in outlays was larger in dollar terms.

Full-year projection remains higher

In its February budget and economic outlook, CBO projected a $1.9 trillion deficit for all of fiscal 2026. That is a baseline projection, not the final deficit that will be reported after the fiscal year concludes.

The same outlook projected total fiscal 2026 outlays of $7.4 trillion and revenues of $5.6 trillion. Those projections represent CBO’s baseline view of the year’s overall budget totals and provide context for the $1.4 trillion deficit already estimated through June.

CBO also projected that debt held by the public would equal 101% of gross domestic product in 2026 under its baseline. Debt held by the public is a measure of federal debt owed to investors outside the federal government, while GDP is the value of goods and services produced in the economy. The packet supports the projection but does not provide a separate update to the debt figure in the July report.

What happens next

Three months remained in fiscal 2026 when CBO reported the nine-month total. The government’s fiscal year ends September 30, after which the full-year budget result can be compared with the February baseline.

The $1.9 trillion projection can change before then. CBO specifically cautions that its baseline may be affected by legislation, administrative action and economic conditions. The July estimate therefore provides a current reading of the deficit’s direction, while the final total will depend on what happens during the rest of the fiscal year.

The report does not by itself establish an imminent default or government shutdown. It is a measure of the gap between federal revenues and outlays through a specified point in the fiscal calendar. For taxpayers and policymakers, its immediate significance is that higher revenues have not offset the faster growth in federal spending in the first nine months of the year.