US budget deficit exceeds 1 trillion in first 5 months of fiscal year 2026
Barrons Roundtable panelists analyze the state of the US economy following Operation Epic Fury.
Federal budget deficit increased by $1 trillion in the first five months of the 2026 fiscal year, as the US government is on pace to record another large deficit.
You don’t choose Congressional Budget Office (CBO) reported that the federal budget deficit was just over $1 trillion in the first five months of fiscal year 2026, and the size of the deficit decreased by $142 billion or 14% compared to the same period in fiscal year 2025.
The CBO noted that government spending was just over $3.1 trillion in the first five months of fiscal year 2026, up $64 billion, or 2%, from the same period last year. Collected federal tax revenue jumped $206 billion, or 11%, compared to the previous year to nearly $2.1 trillion.
The increase in federal tax receipts was driven by higher collections from individual income taxes and payroll taxes, which the CBO notes accounted for nearly two-thirds of the increase, while higher prices also increased the amount of import taxes collected.
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The federal budget deficit increased by $1 trillion in the first five months of fiscal year 2026, a slight decrease from a year ago. (J. David Ake/Getty Images/Getty Images)
The CBO said that from October to February, each person income tax collections were up $99 billion, or 10%, compared to the same period in the previous fiscal year, while payroll tax collections increased $34 billion, or 5%.
Tax duties, section inclusive pricesreached $144 billion in the first five months of fiscal year 2026 — up $109 billion, or 308%, from the same period in the previous fiscal year.
Some of those collected fees may be returned to businesses and individuals who pay them back in the US. Supreme Court ruled that the Trump administration’s spending under the International Economic Emergency Powers Act (IEEPA) was unconstitutional.
Tax refund it would reduce federal tax revenue and thus increase the deficit, and while the Trump administration has moved to implement variable taxes, those could face similar legal challenges and collections could face delays.
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Business income tax collections fell $33 billion, or 23%, in the first five months of the year due to provisions in the 2025 reconciliation bill that increased tax deductions available to companies making certain qualified investments.
Federal use There has been significant growth in Social Security and Medicare, mandatory spending programs that have seen enrollment increase in recent years amid an aging American population.
The spending continues social Security reached $676 billion in the first five months of fiscal year 2026 — an increase of $48 billion, or 8%, from the same period last year. The CBO noted the increased cost-of-living annual benefit rates, while the Social Security Administration’s expansion of eligibility benefits to previously uncovered workers accounted for nearly $7 billion.
Medicare spending jumped $34 billion, or 9%, from the previous year to a total of $475 billion in that period, which the CBO attributed to higher enrollment and payment rates for services.
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Another key mandated program saw similar increases in spending as Medicaid spending also increased by $22 billion, an 8% increase, to $285 billion in total over the five-month period.
Interest expense There was also a significant jump in the national debt, with net interest costs reaching $433 billion in the first five months of the fiscal year. That’s a jump of $31 billion, or 8%, from a year ago and was due to higher national debt and higher interest rates.
While spending money on Department of War increased by $14 billion, or 4%, and the Department of Veterans Affairs increased $11 billion, or 7%, in the first five months of fiscal year 2026 compared to last year, several agencies saw significant decreases.
Spending by Environmental Protection Agency (EPA) decreased by $20 billion, or 74%, although that decrease was due to $20 billion in spending in November and December 2024 under the clean energy grant program and no comparable spending in 2025.
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A similar dynamic played out at the Department of Homeland Security, which saw spending drop by $12 billion, or 23%, due to a modest decrease in disaster spending compared to the prior year despite the impact of higher costs. immigration to another country to force.
