The federal government is spending a lot more than it takes in, and the latest numbers show the gap is still growing. The new report from the CBO lands as the government heads into the final stretch of its budget year.
The Congressional Budget Office, the nonpartisan agency that scores federal budgets, released its July review on Monday, August 11, 2026.
That is not a distant forecast.
Spending climbed $308 billion over that period.
Tax receipts rose only $139 billion, which is why the gap keeps widening.
With that kind of gap, the full-year deficit is projected to come in about $200 billion above last year's level. The trend is simple: the government keeps spending faster than it brings in money.
The projected shortfall is not tied to a recession or a sudden emergency. Instead, it reflects a structural mismatch between spending commitments and revenue, with mandatory programs and interest costs growing faster than tax collections. Even with wages and salaries rising, the government is collecting less than it needs to keep pace with its obligations.
Interest on the national debt is a huge part of the story.
The debt load now exceeds $39 trillion, and a bigger pile of borrowing means more interest to pay.
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The big benefit programs are growing too. Social Security spending rose $70 billion, or 5%, as more people claim benefits and inflation-adjusted payments go up.
Medicare costs climbed $66 billion, or 8%, on higher enrollment and pricier healthcare payments.
Medicaid spending grew $45 billion, also 8%, because per-person expenses are up.
Revenue is not keeping pace. The government is collecting more, just not enough to cover the spending.
Combined payroll and income tax revenue rose $202 billion, or 5%, as wages and salaries grow.
Paycheck withholdings climbed $141 billion, or 5%, over the same period.
But corporate income tax collections fell $89 billion, or 23%, after provisions in the One Big Beautiful Bill Act expanded investment deductions.
Individual tax refunds also rose $23 billion, or 7%, because of the same law.
Tariffs are another wrinkle. Customs duty collections - the money the government takes in from tariffs - rose $18 billion, or 13%, year over year.
But net tariff revenue has dropped sharply since May after the government began paying refunds following a February Supreme Court ruling.
So far, the government has paid out roughly $100 billion in tariff refunds.
The CBO's projection is just a forecast, but the direction is clear. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the borrowing level "astounding" and said a deficit above $2 trillion outside a recession "is not normal."
She also pointed to a milestone that is getting close. "We are about to hit the sobering milestone of $40 trillion in gross national debt, and things are only likely to get worse," MacGuineas said.
The debt already exceeds $39 trillion, so that milestone is not far off.
Her suggested fix is a modest target: hold deficits near 3% of GDP, or gross domestic product, and set up a bipartisan panel to determine how to reach that level.
"We can no longer afford to put off the difficult decisions - the time to act is now," she said.
For everyday investors, the takeaway is less about any single tax bill and more about the trend. When the government borrows this much, it competes for the same money your portfolio needs, and interest costs keep eating a bigger share of the budget.
That is the kind of backdrop that shapes interest rates and the broader economy.
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