The federal government ran a $1.0 trillion deficit in the first five months of fiscal year 2026, the Congressional Budget Office reported this month, putting Washington on pace for one of the largest annual deficits in American history outside of wartime or pandemic emergency spending. With five months still remaining in the fiscal year, the full-year shortfall is projected to reach $1.9 trillion — a figure that would represent more than 7% of gross domestic product and mark the fourth consecutive year of deficits exceeding $1.5 trillion.
The data comes from CBO's Monthly Budget Review for February 2026, published March 7. The review provides the most current window into the government's fiscal trajectory and serves as a critical early indicator of annual budget performance. The $1 trillion threshold, reached only five months into the fiscal year, underscores the structural nature of the federal deficit problem: this is not an emergency spending year, and yet borrowing is already at crisis-level pace.
Revenue Is Up — But Spending Is Outrunning It
The headline number obscures a modest piece of good news: revenues are running substantially higher than a year ago. According to CBO, federal receipts in the first five months of FY2026 rose by $206 billion, or 11 percent, compared to the same period in FY2025. That improvement reflects a combination of stronger wage growth, increased capital gains realizations, and the effects of the Tax Cuts and Jobs Act provisions that remained in place following the One Big Beautiful Bill Act's modifications.
Yet the revenue improvement has been substantially offset by a continued rise in mandatory outlays. Federal spending in the October–February period was $64 billion higher (up 2 percent) year-over-year, driven primarily by Social Security, Medicare, and — critically — interest payments on the national debt. February 2026 alone saw total federal outlays reach $621 billion, $18 billion more than the same month last year.
The federal budget deficit totaled $1.0 trillion in the first five months of fiscal year 2026 — $142 billion less than the deficit recorded during the same period last fiscal year. Revenues rose by $206 billion (or 11 percent), and outlays were $64 billion (or 2 percent) higher.
— Congressional Budget Office, Monthly Budget Review: February 2026
The structural imbalance is not primarily a revenue problem. At 11 percent annual growth, receipts are expanding at a healthy pace. The problem is that mandatory spending programs — Social Security, Medicare, Medicaid, and interest on the $38.9 trillion national debt — are growing faster than the government's ability to collect taxes. As of March 16, 2026, total public debt stood at $38.992 trillion, according to the U.S. Treasury Debt to the Penny — virtually at the $39 trillion mark.
The Full-Year Trajectory
The $1.0 trillion five-month figure implies a full-year deficit of approximately $1.9 trillion on a straight-line basis — which is precisely what CBO projects. That projection is not merely extrapolation: it reflects the agency's detailed analysis of spending schedules, tax deadlines, and mandatory program trajectories. CBO projects that deficits will total $24.4 trillion over the FY2027–FY2036 window, or roughly 6.1 percent of GDP annually.
| Fiscal Year | Deficit | % of GDP | Scale |
|---|---|---|---|
| FY2026 (Projected) | ~$1.9T | ~7.0% | |
| FY2025 (Final) | ~$1.83T | −5.77% | |
| FY2024 | ~$1.83T | −6.20% | |
| FY2023 | ~$1.70T | −6.10% | |
| FY2022 | ~$1.38T | −5.28% | |
| FY2019 (pre-pandemic) | ~$984B | −4.57% |
The contrast with pre-pandemic baseline is stark. In FY2019 — not a recession year — the federal deficit was $984 billion, or 4.57 percent of GDP. The structural deficit has expanded by roughly $900 billion annually since then, without a crisis or emergency to explain it. Chronic deficits of this magnitude, sustained over years, compound the debt and the interest burden simultaneously.
Interest Payments: The Compounding Problem
Embedded within the $1.9 trillion projected deficit is an interest line that cannot be negotiated, legislated away, or deferred. According to CBO's February 2026 Budget and Economic Outlook, interest payments on the national debt are projected to remain above $1 trillion through every year in the 10-year window, rising from approximately $1.0 trillion in FY2026 to $2.1 trillion by FY2036. Interest's share of total federal spending is projected to climb from roughly 14 percent today to nearly 19 percent by 2036 — meaning nearly one in five federal dollars will service past borrowing rather than fund current programs.
The average interest rate on the federal debt stood at 3.320 percent as of February 28, 2026, according to Treasury Fiscal Data. With $38.99 trillion in outstanding debt, a one-percentage-point increase in that average rate would add roughly $390 billion annually to the interest burden — equivalent to the entire annual budget of the Department of Defense's discretionary programs. The government has limited flexibility to absorb that kind of rate sensitivity.
What CBO Projects Forward
The Congressional Budget Office's February 2026 baseline projects deficits exceeding $2 trillion annually beginning in FY2028, and reaching $3.1 trillion by FY2036. That 10-year cumulative deficit — $24.4 trillion — would push the debt-to-GDP ratio to levels well beyond current historical records. According to FRED data (GFDEGDQ188S), debt-to-GDP already stands at 122.49 percent as of Q4 2025. CBO projects it will surpass its all-time historical record by 2030.
None of CBO's baseline projections incorporate the One Big Beautiful Bill Act, which CBO previously scored as adding approximately $3.4 trillion to deficits over a decade. To the extent OBBBA provisions affect mandatory spending, discretionary appropriations, or revenues, the baseline projections represent a conservative floor rather than a ceiling for future borrowing.
The $1.0 trillion five-month deficit figure and all monthly breakdown data are from the CBO Monthly Budget Review: February 2026 (cbo.gov/publication/61978), published March 7, 2026. The fiscal year runs October 1 through September 30. Annual deficit figures expressed as percent of GDP are from FRED series FYFSGDA188S. Current debt outstanding ($38.992T) is from U.S. Treasury Debt to the Penny, record date March 16, 2026. Interest payment projections are from CBO's February 2026 Budget and Economic Outlook baseline.