By Ethan Faverino |
The federal government ran a $432.308 billion deficit in July, marking the largest monthly deficit since March 2021, according to the Joint Economic Committee’s latest Monthly Fiscal Update.
The July deficit brought the federal government’s total deficit for the fiscal year through July to $1.799 trillion. The figure is 10.46% higher than the $1.629 trillion deficit recorded during the comparable period in FY25.
The federal government has spent $1.40 for every $1 it has collected in revenue so far in FY26, with 28.62% of total outlays not covered by federal receipts.
For comparison, the federal government recorded a total deficit of $1.775 trillion during fiscal year 2025.
The Congressional Budget Office’s (CBO) most recent 10-year budget projections estimate that the federal deficit will reach $1.853 trillion in FY26, followed by $1.887 trillion in FY27 and $2.080 trillion in FY28.
Federal net outlays totaled $766.318 billion in July, bringing total net outlays for the fiscal year through July to $6.284 trillion.
That represents a 5.17% increase compared to the $5.975 trillion in net outlays recorded during the same period in FY25. Total federal outlays reached $7.010 trillion during FY25.
The largest categories of federal spending so far in FY26 have been Social Security, Medicare, income security and veterans benefits, net interest on the national debt, defense, and Medicaid.
Social security accounted for $1.384 trillion in spending through July, or approximately 22% of all federal outlays. Medicare accounted for $954.52 billion, or 15.2%.
Income security and veterans benefits accounted for another $968.31 billion (15.4%), while net interest on the federal debt totaled $931.36 billion (14.8%).
Defense spending totaled $764.71 billion through July, representing 12.2% of federal outlays, while Medicaid spending reached $598.21 billion (9.5%).
In July alone, Medicare accounted for $174.25 billion in federal spending, followed by Social Security at $140.68 billion, income security and veterans benefits at $119.28 billion, net interest at $104.15 billion, defense at $86.05 billion, and Medicaid at $58.30 billion.
The CBO currently projects total federal net outlays of $7.449 trillion for FY26, increasing to $7.772 trillion in FY27 and $8.151 trillion in FY28.
Federal spending has continued to exceed revenue despite receipts also increasing compared to the same period last fiscal year.
The federal government collected $334.010 billion in net receipts during July. For the fiscal year through July, total net receipts reached $4.485 trillion.
That is a 3.19% increase from the $4.437 trillion collected during the comparable period in FY25. Total federal receipts reached $5.235 trillion durning FY25.
Individual income taxes remain the largest source of federal revenue, generating $2.369 trillion through July, or 52.8% of all federal receipts.
Social insurance and retirement taxes generated another $1.523 trillion, accounting for 33.9% of receipts.
Corporation income taxes have generated $292.91 billion so far in FY26, representing 6.5% of total receipts. Customs duties have brought in $154.47 billion (3.4%), while all other receipts accounted for $146.22 billion (3.3%).
In July, individual income taxes generated $173.27 billion, while social insurance and retirement taxes generated $139.07 billion. Corporation income taxes generated $13.57 billion during the month.
Customs duties recorded a negative $8.55 billion in July, compared with $135.69 billion collected during the comparable period of FY25. Despite the July figure, customs duties have generated $154.47 billion for the fiscal year to date.
The CBO projects federal receipts will total $5.596 trillion in FY26, $5.885 trillion in FY27 and $6.071 trillion in FY28.
While federal receipts have increased 3.19% compared with the same point in FY25, net outlays have increased by 5.17%
The difference between federal spending and revenue has contributed to the $1.799 trillion deficit accumulated through July.
The federal government’s fiscal year ends September 30, meaning the July figures cover 10 months of FY26.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
